RealD’s Lewis talks up 3D growth

Topper sees tech, creative advances, dismisses 'format fatigue'

Anyone with qualms about the endurance and stature of 3D in film needs to spend only a few minutes with RealD co-founder and chief executive Michael Lewis to be converted. Since the company’s inception in 2003, it has grown to supply technology to more than 21,000 screens in 70 countries, and is continuing to grow, thanks to the boom in emerging markets. In an interview with Diana Lodderhose at the Connaught Hotel in London, Lewis talks about the technological and creative growth potential of 3D, the new wave of prestigious directors who have taken on the format and debunks the notion of 3D fatigue.

Diana Lodderhose: What’s the sales pitch to encourage filmmakers and studios to use your technology?

Michael Lewis: I have learned that if I can get them in the room and show them images, then we have a very high degree of success. When we started the company and were trying to convince people, there weren’t that many people who would listen except for (James) Cameron (who is a board member of RealD). It’s gotten easier because of the success of 3D and amount of additional dollars that it can bring. But because our business is filmmaker-driven, if we can get the filmmaker interested, once they experience doing a film in 3D, they don’t want to go back. This is the new sandbox to play in.

DL: Stats show 3D is declining in animation and fanboy fare. Does this mean audiences are tiring of the format?

ML: I think right around the time of “Avatar” there was tremendous euphoria. More than 70% of audiences saw the film in 3D because you had to see it that way — that’s how it was designed. Last summer, we started to see percentages go down. The extrapolation from that was, “Oh it’s another gimmick; the audience is tired and we’ve got 3D fatigue.” Every article was about that. But what wasn’t covered was that last summer, we had five or six 3D films released in same week, and last year, we had half the screens we have now. There’s no way, whether it’s 2D or 3D, that you’re going to have the screen count to hit those high percentages. All of these films were cannibalizing each other. If you look at our numbers now both domestically and internationally, the 3D percentage on box office has gone up over the course of a whole year. International numbers are north of 60% (of pics available in 3D). In the U.S., it’s at 40%-60%, and since last summer has been on the high end of that.

DL: Peter Jackson’s “The Hobbit: An Unexpected Journey,” is not only shooting in 3D, but is going to be one of the first films to shoot at 48 frames per second, rather than the standard 24 frames per second. Will this change the business?

ML: With digital projectors and digital cameras, because we can run the frame rate faster, the image is clearer, because there is more information. With “The Hobbit,” Jackson is essentially doubling the amount of information by shooting from 24 to 48, so it looks more lifelike. This is going to be a very big deal for our business, because we are constantly trying to raise the bar, but it’s especially important for 3D, because one of the things that happens when you start moving the camera really fast in 3D, the image starts to break apart and it’s hard to track. By going at a higher frame rate, you can do a lot of interesting things with the camera.

I think in the short term, this is going to be one of the big advancements for the industry and specifically for 3D. RealD can do this on our system now. Cameron just said that he’s going to shoot 60 frames a second on the Avatar sequels.

DL: Are these kinds of improvements a big driver for you?

ML: We see ourselves as a visual technology company. We licence our technology, but all we’re doing is tying to make the image better. 3D is a big part of that, but it’s not the only part. It’s certainly not going to be the only part in the future. It’s brightness on the screen, it’s contrast, it’s sharpness of image, it’s a lot of things.

DL: Are exhibitors justified at charging extra to see 3D?

ML: Well, I would look at it a little differently. You go to an auto dealer, you can buy a Ferrari or you can buy a Toyota. You have a choice. It’s not like people are at gunpoint at the box office saying you must go see a movie in RealD. RealD is a better image and a better way to see a movie. More than 50% of people are choosing to see it this way. Pricing finds its equilibrium. What I think we’ll see in the future is that 2D prices will get closer and closer to 3D prices. Our business is going toward a premium business. If you’re going to get out of your house and see a movie, I don’t think you’re going to go cheap on the last few bucks.

DL: How much does the growing wave of directors such as Ridley Scott, Baz Luhrmann and Martin Scorsese, using the format help 3D?

ML: I was down in New Zealand with Peter Jackson on “The Hobbit,” and I asked him how he felt about 3D and whether it was adding complexity or issues. And he said, “I don’t understand what all of the drama is about.” He said they just plan for it and do it. And Ridley Scott said the same thing.

DL: 3D is booming in China and Russia, and recently you’ve signed several deals in China. What do you think the situation is in general with 3D in emerging markets?

ML: Global box office grew by 9% last year — 80% of that was driven by three markets: China, Russia and Latin America. We have been watching and spending a lot of time in China. We opened up offices there about 18 months ago. We now have 2,000 screens in China that are under contract. About 700 of those are installed. We are adding deals every day.

China is boomtown: Box office doubled in the past year, you’re adding nine screens a day, and it’ll be as big as the U.S. market in five years. We are taking market share from our competitors as well, and getting into new builds.

Russia is, depending on whose stats you believe, the No. 5 film market. We think it may be as high as the No. 2 or 3 market for 3D. We see (3D) percentages at the 70%-90% range of overall box office range in Russia. Some of that is it’s the new experience of going to theaters, but also there’s a lot of piracy there. With 3D, it’s pretty hard to pirate. So if you’re going to see a movie in the best possible way, you can’t see it on the street corner and you have to go to the cinema.

DL: Has the global economic crisis made it tougher for 3D films, because of upcharges?

ML: Exhibitors I’ve spoken to are not really seeing any erosion. If you look at the history of the film business, it has been pretty resilient in bad times. It’s a relatively cheap form of entertainment relative to other things.

DL: What about family films? If you’ve got two or three kids, it’s very expensive.

ML: If you have young kids, they fidget with glasses and get uncomfortable, so if you have kids under 6, maybe the value isn’t there. We have seen that fanboy fare does better than animated films. It’s just a fact. But even if you think of “Madagascar 3,” you still had about 50% of the U.S. audience going for a premium.

I don’t know many industries can upcharge 30% to 40% and still get more than half the people to say, “Yeah I’ll buy that ticket.” When we talk to studios about making films in 3D, all you’ve got to do is put the spreadsheet in front of them.

DL: How do you see 3D evolving?

ML: Everything related to the image quality is going to get better and better over the next few years. In the past few years, we’ve been able to get a lot more light on the screens, and higher frame rate is definitely going to be part of the discussion over the next few years. Higher contrast means the image is going to look great. But I think there is going to be some thought given to what the cinema experience really means. Is it a place where we watch movies or is it a collective gathering place with all of these cool technologies where we can take people into a sporting event, or we can do distance learning or we can go to a c

Trend-wise it’s premium. You’re going to see more and more of this big format, bigscreens and great presentation.