For a biz so focused on the booming potential of digital 3-D, Hollywood’s studios — and the exhibs — are looking decidedly myopic.
While pics like “Journey to the Center of the Earth” and “Monsters vs. Aliens” created a big B.O. splash for the emerging form, behind the scenes, the economics of 3-D eyewear have become something of a free-for-all, with distribs looking to get out of subsidizing the disposable glasses and exhibs unprepared — and unwilling — to take on the cost themselves.
Fox, whose first 3-D release, “Ice Age: Dawn of the Dinosaurs,” bows in July, is the first distrib to balk at paying for disposable 3-D glasses.
But it isn’t alone in wanting to get out of the glasses biz: With 3-D attendance booming and disposable specs costing about 75¢ per pair, distribs and exhibs are haggling over millions of dollars in costs.
“The economics of showing 3-D movies have been largely subsidized by the film distributors for the theaters that use disposable glasses,” says John Carey, VP of worldwide sales for Dolby, which offers reusable glasses and so doesn’t benefit from the subsidies.
Competitors Real D, which accounts for some 90% of the American market, and Korea-based MasterImage are the ones caught in the middle.
Some in the 3-D biz have long predicted that distribs would stop paying for disposable glasses — eventually — but it’s clear that most exhibs didn’t expect to pay for glasses anytime soon, if ever.
Now, if the pushback from Fox and other studios takes hold, they’re looking at having to pay millions upfront for the 3-D specs, to store them and to manage the inventory. And they’re not happy about it.
Regal Cinemas responded to Fox’s stance by threatening to show “Ice Age 3” only in 2-D unless Fox went back to the old business model. But that’s probably little more than a bluff, as Fox holds a trump card: the year’s most anticipated 3-D title, James Cameron‘s “Avatar,” slated for December.
Fox is resisting a business model invented mostly by Disney when 3-D pics were rare and the Mouse wanted to seed the market. Distribs bought the glasses and shipped them to theaters, sparing exhibs almost all inventory and administrative costs. After a pic closed, the exhib and distrib would square up over how many glasses were used and how many were left over.
Now, with 3-D movies coming from all studios about three weeks apart, the accounting is more complicated. Each studio strikes its own deals covering the amount and terms of subsidies on 3-D glasses, all under strict nondisclosure agreements. Even Disney has tweaked the model over time.
One compromise would be for theaters to charge for disposable glasses, then discount tickets for customers who bring in their own.
But that could hurt Real D. Some of the company’s royalty deals are based on a cut of the premium on 3-D tickets. In those deals, if the 3-D upcharge shrinks, so does Real D’s cut.
Dolby’s Carey says he asked distribs to offer the same subsidy on reusable glasses for Dolby-equipped theaters but was told that distribs don’t want to enter a new arrangement because they’re trying to get out of the one they’re already in.