In the world of 3D exhibition, the companies that make the glasses and add-ons systems used by theaters to screen films in 3D are knocking heads over screens in this country and worldwide.
Though RealD got to the party early and locked in some impressive contracts, a group of tough challengers — some among the biggest names in entertainment tech — is developing their own set of relationships and strongholds.
The three largest players in the 3D exhibition market are still RealD, Dolby and Xpand. RealD is the undisputed frontrunner, with greater than 85% market share in the U.S. Company recently announced it had passed 15,000 installed screens worldwide.
Started in 2003 by CEO Michael Lewis, RealD adds complex technology to a d-cinema projector but requires only simple polarized glasses, which can be disposable. RealD also uses a unique business model. Instead of selling its systems outright, it collects a royalty on each ticket. Exhibs have liked that because they’re not on the hook for an expensive add-on should the format — or RealD itself — go belly-up. RealD has aggressively pursued long-term deals with major theater chains to lock in market share.
The company has approximately 8,600 screens in the U.S. and Canada at about 2,300 locations. There are around 6,500 international RealD-enabled screens at 2,150 locations outside the U.S. These numbers translate to a 182% increase in their base of installed theatres in the last 12 months alone.
Dolby, a much older company with a proud brand and deep relationships with exhibitors, entered the 3D market later with a (color-based) interference filter system that requires more expensive, reusable glasses, but the glasses are still “passive” — they have no electronics built in. Dolby doesn’t sell to theater chains but to aggregators who put together d-cinema systems for theaters.
Xpand has built a reputation for their high performance active shutter 3D glasses ($35 a pair, reusable) and in the process won 3,500 screens in total, many in Asia and Europe. Because the Xpand glasses have electronics built into the frames, it requires somewhat less tech in the projector — or in the TV, as Xpand makes universal glasses for today’s active-shutter 3D TVs. Company also just introduced a 3D plug-in for PowerPoint.
“It’s true that it might be cheaper to see a 3D with passive glasses but I don’t think audiences are stupid,” said Xpand’s chief strategy officer, Ami Dror. “They can tell the difference between good 3D and bad 3D. When it’s bad, people get headaches or it just doesn’t look as good. Our system looks good and it costs more. That’s the choice exhibitors have to make.”
All three companies claim to have superior tech, though, and in fact all are rated high by experts. RealD is arguably the most vulnerable to cross-talk (a double image when the left eye and right eye frames aren’t fully separated), but the difference is small.
Trailing the big three are upstart Masterimage, which uses tech similar to RealD and has sold systems to more than a dozen mid-sized theater chains; Panavision, which uses a “spectral comb” filter that’s a cousin to Dolby and is starting a push in the Americas; Technicolor, which is focused mainly on helping film projectors show 3D; and startup Oculus, which has another 35mm-based 3D system but for now is focused on making eco-friendly polarized glasses.
“We have relationships with all these exhibitors for a reason,” said RealD’s Lewis. “If our product didn’t give a great experience at a price that works for the exhibitors, we wouldn’t be there.” But nowadays the 3D companies aren’t really competing on the quality of their technology but rather on economics. And that may give RealD’s competitors an opening.
Though Lewis won’t discuss details of RealD’s exhib deals, its standard deal charges a royalty on each ticket sold for a RealD showing plus fees for the system itself over the course of the time it’s used by the theater. Exhibs pay the royalty and fees as they go but are spared having to buy the system.
Specs and bucks
At the heart of the competition is 3D glasses, and here RealD has a major advantage. In North America, distributors supply RealD disposable glasses to theaters, so RealD’s glasses are cost-free to exhibs. Distribs don’t subsidize reusable glasses. Outside the U.S., RealD sells the glasses to the theater, which then resells them to patrons for a cost of approximately €1, Lewis said. Patrons are encouraged to carry their own and avoid the extra charge when they return.
Cleaning, loss, breakage and theft are significant expenses with reusables, but even with those costs reusables are arguably cheaper over their life. However, since exhibs don’t bear the cost of disposables, RealD’s competitors lose that advantage.
RealD’s rivals also claim to offer a better deal since they don’t force a theater chain to sign a multiyear deal or pay a per-ticket royalty. Masterimage’s pitch has convinced more than a dozen mid-range theater chains, including Bow Tie Cinemas, to buy their 3D systems. The company’s glasses are also subsidized in the U.S. Outside the U.S., the glasses are sold to the theater and then resold to patrons as well. Masterimage prexy Peter Koplik believes his glasses are less expensive than RealD’s.
All companies offering 3D systems with polarized glasses have to worry about cross-talk. The big advantage of the Xpand shutter glasses is that there is no cross-talk; only one eye sees the screen at a time. That earns them plaudits among some 3D experts, though the glasses are relatively heavy, can fail and need recharging.
Lewis doesn’t believe RealD’s glasses are outperformed or that Xpand’s business model will work over the long haul.
“The best way to do 3D has been established,” Lewis said.
Panavision entered the 3D market only in October. “We know we’re coming into this late,” said Eric Rodli, general manager of 3D systems for Panavision. “When you’re late to a party, you have to bring a really good dessert, and that’s what we think we’ve done.” Panavision has just over 50 screens between the U.S. and South America. Rodli believes its biggest areas of opportunity for now will be outside the U.S.
Technicolor has designed low-cost systems designed to upgrade film projectors to 3D — an opportunity even Technicolor thinks is only going to last a few years. Their pitch is to theaters and chains that lack resources for a digital upgrade. With the Technicolor system, they can show 3D (and collect the 3D upcharge) with a 35mm projector. Technicolor uses polarized glasses modeled on RealD’s design but specially designed by Technicolor.
These smaller companies clearly have no intention of giving up the fight despite the considerable advantages RealD brings to the battle. They hope that the d-cinema wave is big enough for a bunch of companies to surf, and they may be right.
The studios want to push the digital transition and lose the expense of release prints. And while auds seem indifferent to the quality advantages of d-cinema, they’ve flocked to 3D, even at an upcharge, so it’s become the biggest inducement for theaters to go digital.
As Koplik puts it: “RealD is Goliath and we’re David, but we’re getting better with our slingshot.”