Warner’s decision to reverse course and not release “Harry Potter and the Deathly Hallows: Part 1″ in 3D has drawn applause from advocates of the format but also illustrates the problems all studios are facing as they grapple with the 3D boom.“Deathly Hallows: Part 1″ becomes the first major pic to cancel a previously announced 3D release due to production problems. Though the decision reps a financial hit to Warner, which will have to absorb whatever it’s already spent on the conversion and forego tens of millions in box office from premium tickets, 3D pros see it as an important step forward in the evolution of the format. For the first time, the argument goes, a studio has drawn a line, preferring no 3D to bad 3D. The hope is that now there will be more pressure to do 3D well than to do it everywhere. “We applaud Warner Bros. for championing quality,” said Barry Sandrew, founder and president of conversion company Legend 3D. “The only way to produce quality conversion is to allow for enough time.” Damian Wader, VP of business development at conversion pioneer In-Three, agreed with Sandrew’s comments. Time is the “biggest problem we’ve all faced,” said Wader. “This is a very time-consuming process, and we’re asked to get these things done in a timeframe that’s not commensurate with what there is to do. We hope a greater understanding of what it takes to do 3D well will come from this.” Neither Legend3D nor In-Three worked on the “Deathly Hallows” conversion. Warners’ decision also underscores the elevated value it places on the “Potter” franchise — particularly since there could eventually be more “Potter” films. In a recent interview with Oprah Winfrey, author J.K. Rowling said she hasn’t ruled out writing more “Potter” books. Warner’s focus now shifts to converting “Deathly Hallows: Part 2,” which the studio said will go out in 2D and 3D on July 15, 2011, as previously announced. The studio worked feverishly to salvage “Part 1″ in 3D. But on Friday, Warner issued a statement conceding the conversion couldn’t be completed in time for the Nov. 19 release and announcing that the pic will go out only in 2D and Imax. Imax was the lead vendor on the 3D conversion effort on “Part 1,” responsible for subcontracting to other conversion vendors, tracking and quality control. It will retain that role on “Part 2.” Conversion to 3D is a new business for Imax, which had converted 12 minutes of “Harry Potter and the Half-Blood Prince” to stereoscopic but had never converted an entire picture. Imax was given the “Deathly Hallows” contract in May but was not given the greenlight to begin work until August, putting the company behind schedule even from the start. According to several people who have seen converted footage, quality was high but the count of final shots had fallen well behind schedule. It didn’t help that the cut was only recently locked and visual effects were still being completed. In the last few weeks, as it became clear that deadlines were slipping badly, both Imax and the studio began to scramble for alternatives. Imax put out “911″ calls for emergency help to other 3D conversion companies but couldn’t find enough takers to catch up. The studio had taken one option off the table: releas ing in 3D no matter what. Earlier this year, the studio converted the filmed-in-2D “Clash of the Ti tans.” Though it earned a handsome $493 million worldwide, there were vocal critics, includ ing some studio insiders, of the visuals . But Warner learned from the experience, and execs decided they didn’t want to take a risk with “Harry Potter,” one of the studio’s crown jewels. Last week, the studio went so far as to pull visual effects producer Randy Starr from the Hawaii set of New Line’s 3D “Journey to the Center of the Earth” sequel and whisk him to Burbank to help on “Deathly Hallows.” Work continued into Friday as execs wrestled with whether to release only selected scenes in 3D, as was done on the previous “Potter”; move the release date; or cancel the 3D release. Moving the release date proved impractical, and on Friday morning, they decided to pull the plug on the 3D conversion. Without 3D, Warner misses tens of millions in potential grosses on the pic. The last “Potter” grossed $302 million in the U.S. If the next one were to do similar business, and if 30% of admissions were for 3D — a low figure compared with recent tentpoles — it would add $45 million to the domestic gross alone. That assumes a 50% premium for 3D tickets. A higher 3D percentage and more admissions would raise that figure substantially. Warner’s statement did not rule out the possibility of a limited 3D re-release of “Deathly Hallows: Part 1″ in 2011, shortly before the July 15 release of “Part 2.” In an indication Warner was still pondering its next move, as of Friday, some crews on the 3D conversion of “Part 1″ had not been officially released. Those artists may be retained to start on “Part 2.” In any event, Warner will want to be sure “Part 2″ is safely completed before diverting more of its scarce conversion resources to “Part 1.” Any re-release of “Part 1″ would have to be limited, perhaps only to Imax theaters. The 3D release sked for the weeks leading up to that date already includes “Pirates of the Caribbean: On Stranger Tides” May 20, “Kung Fu Panda: The Kaboom of Doom” May 26, Warner’s own “The Green Lantern” June 17 and “Cars 2″ on June 24. There has been some fallout within Warner Bros. over the “Potter” problems and other issues with 3D. Responsibility for 3D supervision has shifted from the post-production department to the visual effects department. That reflects a growing realization, at Warner and at other studios, that existing processes for overseeing 3D aren’t reliable. More generally, the industry is awakening to the fact that the 3D conversion business is in its infancy and is far less robust than the visual effects business. Vfx can be done quickly at the last moment because the vfx industry has a great deal of excess worldwide capacity. Execs and filmmakers can postpone creative decisions and add f/x shots until shortly before their delivery date and count on the availability of dozens of companies and hundreds of artists to help meet their deadlines. As a result, no major tentpole has missed a release date due to vfx delays since “Titanic.” For 3D conversion, by contrast, there are few proven vendors and little excess capacity, so there simply isn’t a pipeline wide enough to do large amounts of quality 3D conversion quickly. Advocates of conversion say it is possible to deliver high-quality converted 3D with enough time and resources — Disney’s “Alice in Wonderland” and “G-Force,” for example, featured converted footage without controversy. Lucasfilm has allotted 15-27 months to convert “Star Wars: Episode I — The Phantom Menace” for a still-unannounced release date in 2012. Nor has it announced a schedule for conversion of the rest of the franchise. “Titanic,” which is also to get a 3D conversion, is targeting April 15, 2012, the 100th anniversary of the ship’s sinking, for 3D release. With 18 months to go, producers remain mum on whether work has already begun.