Thursday, September 29, 2011

Did Sony just kill 3D? Who foots the bill when studios won't pay for 3D glasses?

The Hollywood Reporter uh, reported (sorry) yesterday that Sony Pictures will be the first of the major studios to no longer pay for the 3D glasses in the Real-D format (as opposed to specialized IMAX 3D glasses), but rather demand that exhibitors pay for the $3-4 glasses themselves.  Several studios have apparently been looking into such an arrangement, but Sony struck first blood, in a move that could have devastating consequences for the 3D movie business in America.  The policy is set to go into effect May of next year, just in time for Sony's two big summer films, both live-action 3D franchise pictures.  Men in Black 3D comes out over Memorial Day weekend while The Amazing Spider-Man drops on July 3rd.  While the reality is that the situation won't affect most kinds of 3D (Real-D is just one of several kinds offered in first-run theaters today), the perception could do real damage to the format if the theaters choose to pass down this extra expense to the consumers.  And all-things considered, I can't imagine why they wouldn't.

Right now, theaters get those $3-4 glasses from the studios for free.  But if they were forced to fork over said extra cash for each pair of glasses used, they would pretty much negate the $3-5 3D-ticket up-charge they currently enjoy for a 3D film.  Moreover, since theaters split their ticket revenues with the studios to varying degrees (generally 50/50, but sometimes MUCH lower for the theaters in the first ten days), theaters are technically looking at a loss for each 3D ticket sold compared to what they would have made for that 2D ticket.  If an audience member pays $10 for a 2D evening show, the theater gets around $5 of that ticket, right?  But if the theater charges $15 for the 3D show, AND must pay the studios $4 for the pair of glasses, then the theater is looking at just $3.50 for that 3D showing.  So, unless I did the math wrong (always possible...), a theater chain showing a film in 2D and Real-D 3D would have to either charge the consumer an additional $4 for the privilege of buying the glasses or eat the extra cost, an extra cost that would make said theater disinclined to show the film in 3D if they have a choice in the matter. Better to make $5 showing The Amazing Spider-Man 2D then make $3.50 showing The Amazing Spider-Man 3D.

So if the theater owners want to at least restore the prior profit margin for 3D films, they'd have little choice but to charge consumers for those 3D glasses.  The problem here is one of perception.  While many overseas markets already charge consumers for the 3D glasses they use, America thus-far does not.  But, most moviegoers arguably operate under the perception that some, if not most, of that $3-5 3D ticket up-charge comes from the rental of those 3D glasses.  Telling them that they have to pay that up charge AND an additional $4 to see a movie in 3D will either drive them away from the format or (worse for the theaters) severely cut into their purchase of concessions.

Even if we argue that audiences will be able to keep and reuse those 3D glasses each time they return to a participating theater, that still puts a burden on the consumer to remember to take their 3D glasses with them each time they go to the theater or risk paying an additional $4 per ticket.  Point being, even under the best case scenario, a consumer would basically pay an additional $8 per 3D ticket ($4 for the up-charge, $4 for the glasses) the first time they see a 3D movie and each time they forget and/or break their 3D glasses.  Obviously many airplanes have different in-flight entertainment options now, in the older days, you basically paid $5 to rent the earphones to allow you to watch the in-flight movie. If you kept your earphones and they fit in the seat slot, you saved yourself $5 each time you flew.  But of course, not everyone flies all that much, and even if they forsake the earphones, they can still fly one the plane.

Point being, if this comes to pass, especially if it comes to pass from other studios and involves the other 3D glasses formats, it could really be the would-be death of 3D.  Theaters will be forced to choose between basically losing the extra money that they get from 3D ticket sales or pass along the cost to consumers, which would likely lead to a genuine revolt against the already over-priced format.  Why Sony (and theoretically the other studios) are willing to risk this is beyond me.  Generally speaking, when your format is going through growing pains, you make it more appealing to the consumer and/or middle-men (exhibitors), not less so.  This may turn out to be nothing of note, especially if the other studios do not follow suit.  But unlike the poorly-advertised and thus ultimately irrelevant 'premium Video On Demand' from last year, this change will have immediate and noticeable consequences as early as this summer.  Just what those consequences are will be determined by how the theaters react, as well as whether or not other studios choose to follow suit.  But with theaters facing the choice of either eating their 3D profit margins or pricing the format out of reasonability for most moviegoers, Sony's somewhat greedy move could very-well permanently harm the format in a very real way. This one should be followed closely, as the outcomes could be severe...

What are your thoughts on this move?  For those who do seek out 3D movies, how much is too much?  And, if I may, what effect does the price of your ticket have on how much you spend on concessions?  Feel free to share below.

Scott Mendelson


tgt said...

You missed a case. Instead of making glasses return optional, make it mandatory. If each pair of glasses is used only used 1 day (5 showings?), that cuts the costs severely. I don't see any reason why the glasses couldn't be reused indefinitely.

mouse said...

Somehow in 35 years I've managed to have never once seen a movie in 3d (watched part of a DVD in 3d bu tthe glasses didn't match the colors and made me nauseous after 2 minutes). There have been a few I was interested in seeing that way but the cost is always problematic (just for going to the theatre at all) so I've never bothered. An increase in ticket price would pretty much guarantee that I continue to never bother. I do know some rabid 3d fans who own their own glasses already; sturdier pairs than the little paper thingies and allegedly with a more precise color on the lenses. So for them, I guess it wouldn't matter.


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