Digital Hollywood: 3D needs to make money on DVD

PHYSICAL: Better technology necessary for consumer adoption

By Susanne Ault -- Video Business, 5/5/2009

MAY 5 | PHYSICAL: SANTA MONICA, Calif.—If studios hope to maintain their 3D theatrical momentum, the industry needs to start delivering the same technology into homes, Digital Hollywood participants here said on Tuesday.

Hollywood receives higher ticket revenue for 3D films, such as Bolt and Monsters vs. Aliens, over versions projected in 2D. But in order to justify the typically higher budget of 3D productions, which can be $15 million to $20 million over 2D, studios need to generate additional money from the movies on TV and DVD/Blu-ray Disc. Theatrical films, whose profits are derived from these secondary markets, usually aren’t greenlit unless there is a clear plan for them on TV and/or DVD/Blu-ray.

However, 3D movies are downgraded to lesser quality anaglyph technology for DVD/Blu-ray release. Although advanced 3D-at-home equipment and delivery is achievable now, there is a lack of standards guaranteeing that the 3D content will play on various 3D-ready devices.

Digital Hollywood participants worry that viewers will turn away from DVDs featuring 3D because of the weaker anaglyph presentation.

“So much monetization of content needs to happen in the home channel,” said James Dix, an analyst at Wedbush Morgan Securities. “But with 3D in theaters, does that hurt their sales on DVD? Does that hurt their monetization at home?”

Dix said he’s concerned about Jeffrey Katzenberg’s past remarks that forecast a true 3D-at-home market will likely not develop for another five to seven years. Katzenberg doubted that consumers will rush to upgrade to 3D-ready TVs if they’ve already just purchased high-definition sets.

“You don’t break even theatrically,” A. Dale Mayo, chairman/president/CEO of 3D exhibiting firm Cinedigm, said at Digital Hollywood, noting the importance of such ancillary streams as DVD, TV and paid downloads.

Companies are plowing ahead on releasing theatrical-quality 3D-at-home products, despite whether standards are yet in place. Kerner New York, a 3D production firm that spun off from Lucasfilm’s Industrial Light & Magic, is developing a device that will enable consumers’ existing TVs to playback dramatically improved 3D imagery.

“Let’s say anaglyph is at a one and [state-of-the-art theatrical] is at a 10, then this device can allow TVs to show 3D at a level five,” Neal Weinstock, chairman and CEO of Kerner, told Video Business following the session.

Weinstock declined to specify when the device would roll out for sale.

David Naranjo, director of product development at 3D-ready TV maker Mitsubishi, agreed that the creation of such a device to motivate 3D consumption is a hot topic. There are 2.5 million 3D-ready TVs now in homes, but that base will have to greatly expand to break the technology into the mainstream.

“There are so many more TV sets out there that aren’t 3D-ready—so how can we get them 3D?” asked Naranjo. “There are many discussions about that.”

Naranjo believes that 3D at home needs to become a reality soon.

“Kids are more forgiving about having to view content in anaglyph, but others are going to have different expectations,” he said. “We’re trying to create the same environment in the home as people experience in theaters.”

There is relative ease in transitioning to 3D TV series production, claimed session participants. One episode would cost just $25,000 over the same episode rendered in 2D, according to Kerner’s Weinstock.