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Shrek 4 was our first movie using the Technicolor 3d Film system. Let me say first that this was NOT a film 3d vs digital 3d decision. We had no way to secure the $$$ to go the digital route. So , please lets not hash that out. You may feel that I have no business being an exhibitor if I can’t access $70,000 to equip a screen; maybe that should be a different topic.

The question was to go 3d or not go 3d now. We decided to make the change now for two reasons: 1)patrons have shown a desire to see and pay more for 3d movies and 2) there is plenty of evidence that a 3d theater will take a great deal of business from a non-3d theater.

As has been mentioned before on the forum, there are 25 movies scheduled to be released in 3d over the next 12 mos., 46 over the next 24 mos. 15 of the 25 over the next 12 mos. are from studios that have already agreed to use Tech 3d and 29 of the 46. There is plenty of product to choose. I would be shocked if we did not play at least 8 movies maybe as many as 12 if things work out. I used 8 for my first year analysis. 10 seems to be very doable. 3-4 of the possible 12 movies are movies in the fall or spring that we normally would not be able to get.

We compete with a 8-plex that is located 12 minutes away. They currently do not have 3d but it is supposively in their plans by the end of the year. We would lose significant revenue to them if they had 3d and we did not. We have 1-3d theater 20 mins away and 2 more 3d theaters 30 mins away, We have seen some loss in ticket revenue to those theaters. So we have a few months head start. My best guess is that we lose as much as 15% on the better 3d movies (Avatar/Dragon) and 5-7% on the others right now. If my main competitor had 3d and we did not, I believe we could lose as much 50% on the better movies.

Technically I believe the presentation is as good as any other 3d presentation out there, especially to the average consumer. If you were to compare them side by side like you can at Best Buy, then maybe you can declare one better than the other. The lens was pretty easy to focus with the test loop supplied. The film is very easy to splice together.

Equipment: We did buy a new silver screen. We received it in 4 weeks and 3 days from the time of ordering. It is from Severston and looks pretty good to me. Many on FT feel that they are one of the better screen makers as well. We bought a re-furbished lamphouse and Simple XL projector. We are adding a 4th screen this summer so we needed more equipment anyway, so our ultimate incremental cost for equipment was minimal. We did have to use service techs from 6 hours away (Haden Theater Supply) which was expensive, but we had them give all equipment in the theater a good look over. All of the room’s presentation is much better than before.

First 2-days of results. As was reported on another thread Shrek 4 looks like it will perform 40% worse than Shrek 3. We are up 47% so far. So far I am pleased with the results. We are seeing many new faces.

Hopefully our ticket prices (normally $4 child, $5 Student/Adult Matinee/Senior, $6 adults + $2 3d charge) and concession prices will get people to come to us more often for all movies. We are located in a bedroom community 5 min. away from 50,000 population town. For 50% or more of the people in this community we are the closer theater. Unfortunately the history of the theater before we re-opened was not pretty. It was only open about half of the time the precious 10 years.

I will measure how our performance is on similar films. I will compare us to at least the same 22 theaters that I mentioned in the other thread. I will also track our percentile rank (through Rentrak) on other non-3d movies to see if we are attracting more people.

Long-term goal: to gross more than we are now to make the digital upgrade when we need to.

After 1 week, I am extremely pleased with this system. Customers have been very positive on the picture. Not one person has yet to say it was worse than they had seen before.

The analysis: (For the first 2 weeks of on the break release) I am tracking our percentile rank within the KC district. Normally we rank approximately 14th percentile (meaning 86% gross more than us). We have recently been as high as 24% (Percy Jackson) and as low as 0% (Bounty Hunter).

I am also tracking our gross vs. the 8-plex neighboring theater. On the kid friendly movies (Monsters Vs aliens, UP, alvin 2, Bedtime Stories) we gross 18% of what they do. On the big action blockbusters that skew older (Iron Man 2, Star trek, Holmes, Transformers) we gross about 8% of what they do.

I am also tracking gross against two other theaters in the area (a 4-screen and a 3-screen). On the kid friendly titles we will pretty much do the same. On the big action blockbusters, we will gross about 67-70% of what they do.

The numbers: KC area rank: 40%, Gross vs bigger competitor 47% of what they grossed vs average of 18%, gross vs 2 similar peers 274% and 222%.

What dollar gross might that be? Approximately $3000-3500 more. 60% to Paramount, $1200-1400 more to us. Not including concessions.

But it has only been 1 week.

Week 2 saw better numbers vs. my peers.

The numbers: KC area rank: 45%, Gross vs bigger competitor 58% of what they grossed vs average of 18%, gross vs 2 similar peers 387% and 309%.

Very pleased so far.

We ran Shrek 4 for 4 weeks. Extemely pleased with how it worked for us.

Technical Side: The print seemed to be in average condition for us vs. other films ran as much. Ran the print at least 140 times. The print did have what seems to be the typical scratches on the sides of the film. These scrathces were not visible on the 3d screen. I watched the an hour of the last show we had. The print looked very good. There were some random spots (usually splices) that looked like a quick snowflake. I asked what seemed to be many hundreds of people who have seem multiple 3d movies and they unanimously thought the presentation was as good as what they had seen elsewhere. (BTW all theaters within 30-45 mins run Real3d).

Now the fun part-financial numbers. We grossed 60% more than our previous high grosser which happened to be Shrek 3. We grossed 160% more than our 19 highest grossing movies (the average of).

Guessing what we might have grossed if we did not have 3d: Most theaters in our area grossed between 43% and 74% on Shrek 4 as they did on Shrek 3. The 74% was a 3d theater. So I threw that one out. My closest peers did 43% and 59%. So I asummed we might have done 60% of Shrek 3 on Shrek 4. I feel good about this assumption b/c I am certain a decent amount of folks would have gone to a 3d theater.

We grossed $17,137 on Shrek 4 and $10,714 on Shrek 3. So taking 60% of $10,714 would be $6428. So we grossed an additional $10,708. 60% to Paramount leaves $4283 for us.

Concessions: Approx. 1570 more people came x $1.70 gross margin on concessions leaves an incremental concession operating profit of $2669.

Total incremental operating profit $4283+$2669=$6952.

Technicolor charge is $2,000 per movie per year with a maximum of $12,000 per year. I plan on playing at least 8 movies in 3d in the first year. I plan on taking 6 of them that I would have certainly played on 2d film and assigning them $2,000 each. Those six I expect to be: Shrek 4, Despicable Me, Cats & Dogs 2, Megamind, Harry Potter, and Yogi Bear. That means any movie that I play outside of those 6 will be alloted a $0.00 Technicolor charge.

Additional Advertising: we did run a additional 8 in display ad on the weekends for 3 weeks that cost us approx. $320.

Labor was marginally increased: approx. $120 An additional 2 hours per Fri/Sat for two weekends (spread out over other businesses we own for the dead time after a movie starts).

Net incremental income: $4512

Too soon to tell if we gross higher on other non-3d movies due to increase awareness that we exist in our area.

Rufusjack:

Thank you for the excellent in-depth analysis. In a business where everyone tries to keep their cards close to their vest, it is refreshing to see such a forthcoming and detailed analysis.

Our next 3d movie using the Technicolor 3d Film system will be Despicable Me. Due to the 3d logjam right now, we will be the only theater in a area of 75,000 people playing it. The next closest theater playing it in 3d will be 30 miles away. Two additional theaters in the market will have it in 2d.

As was hoping, we were not punished much by not having Toy Story 3 in 3d. We did get many people expecting it to be in 3d b/c we played Shrek 4 in 3d. We have done what seems to be the norm and that is we do nothing to let customers know that a movie is not in 3d. We do like everyone else and note that it is in 3d when we are playing it 3d. Very small % of folks left after finding out the movie was not in 3d. No different than before.

The Last Airbender was easier to deal with as the closest 3d theater was 30 miles away and word spread quickly that the 3d was not very good amongst theater goers.

Interesting note that one of the theaters that is 20 mins away from me has started placing in their listings the following: "This feature is in traditional 2D format." on movies shown in 2d that are available in 3d.

Intersting weekend coming up.

I am still high on this system. We are seeing pretty close to the same numbers as we saw on Shrek 4 vs. our peers. Having it in 3d vs 2d at least doubled our ticket revenues. Universal has offered a 2d print for next week but I am not sure we will take it.

Our next 3d movie will be Cats & Dogs 2. Most industry projections for this are about half of what they were for Despicable Me.

post Despicable Me update"

Technical: Print had small scratch on the far side, but you really had to look for it. Image still looked very good.

The numbers: It was our 2nd best grosser after Shrek 4 in 3d. Similar performance vs our peers as Shrek 4. Additional $5748 in gross, 52% film rental leave $2753. Additional concession gross $675. No additional labor needed. $150 additional advertising.

Note: Technicolor had to charge me an additional $155 for state usage tax for each movie.

So $2753+675-2155-150= $1123 in incremental income. Not alot I will admit. But....

I am comfortable saying that having 3d led to us having a greater grosses on Toy Story 3. Probably an additional $1200 in incremental income.

So to date an additional $8400.

I am not expecting any incremental income on Cats & Dogs 2. My hope is to break-even.

Finished running Cats & Dogs 2. Pretty much played out as expected. Within a $100 either way of breaking even when you factor in the $2,000 charge. We had our highest comps. vs our peers.

It get interesting now. Our much bigger competitor just installed 3d this week and will run Piranha 3d as we will too. For us we would not have run Piranha at all if it was not in 3d. Since Technicolor only charges you for the first 6 movies you play each year and since we are on pace for 11 movies, this movie will be all gravy to us.

We did have some price shock with some customers regarding the additonal 3d charge we charge. Hopefully that sticker shock will be higher for our competitor as their prime time adult 3d ticket will be $11 to our $8.

The following was a response on the Facebook page of my much bigger competitor regarding this issue (pretty funny what some staff thinks) :

Joe Poe (name changed to not embarass the author for mistakes) ‎*takes deep breath*
The Capital 8 theater is a theater unlike many theaters in the Goodrich company. It is one of the only ones that doesn't actually have any competition that near to it. It is also the theater that is furthest away from it's mother location in Grand Rapids Michigan. With a population of only 40,000 in Jefferson City and with no competition it is a miracle the Capital 8 gets the attention it does. Goodrich Quality theaters is in the process of converting all of its 28 theaters (consisting of 270 screens) to digital by the end of the year. To convert a theater to digital it costs roughly$150,000 per screen. Now lets do some math. If we do not include the Capital 8 that means Goodrich Quality Theaters is spending around $39,300,000 just to upgrade its other theaters (you know the ones that actually have competition and need to have these upgrades to compete with the other competitors). Goodrich Quality Theater also has some of the lowest concession prices compared to other competitors. Theater prices for concession are high but thats because it makes less than 1% on its ticket prices. They are also one of the only company's that won't make you leave that soda and candy you so indiscreetly have sticking out of your purse at home. Out of the many theaters I have gone to Capital 8 is one of the kindest and cheapest (and I'm just not saying that because I used to work there). Getting a free drink if your in line for more than 6 minutes, highly discounted coupons...Their ya go! Everyone who is complaining about concession prices, sign up for an FMG card here. You get free concession after you see only 3 movies, you get coupons sent to your email address every week for half off on drinks and popcorn (sm drink sm popcorn $3, md drink md popcorn $3.5, lg drink lg popcorn $4).
www.gqti.com/signup.aspx

Now about Holts Summit's supposed 3D projector...its not a 3D projector.
Holts Summit has a 3D lens attached to their 35 mm film projector. This is the cheapest way to create the 3D effect for movie goers. Goodrich Quality Theater is doing realD 3D. Its a whole new DIGITAL projector with the best digital sound and a new $5000 screen. That lens Holts Summit is using is around $10,000 to $20,000 lens that still uses 35mm film. Meaning you will still get dust particles and scratches on your prints which greatly effect the quality of the 3D effect. All those problems get taken away when you use digital. Meaning Goodrich is paying $150,000 per each of its 270 theaters, not to mention a couple $1,000 more for 3D, for its movie goers while Holts Summit bought a $15,000 lens.

Time for an update:

Piranha 3d: Did pretty decent for us compared other movies of the year. We did better with it that many other higher profile titles (Date Night for example). Our other option would have been a move-over movie. Thus was our first horror movie that we played on the break. Oiur numbers compared to our competitor was very good (we did 30% of their gross, which normally for a 15-25 year old target would be more like 10%). Factoring in what else I might have played, I estimate incremental revenue to be at $800.

Despicable Me: After a couple of weeks of Piranha we ran Despicable Me again and we just charged just $5 for the tickets. Ran it for another 3-4 weeks and it was our highest grosser during that time. Print still looked pretty good. Despicable Me is now our second top grossing movie in 4 years after Shrek 4 (our first 3d movie) Factoring in what else I might have played, I estimate incremental revenue to be at $960.

Right now we want to make sure that we are always playing something in 3d to keep awareness out there. 3d is still playing very well for us.

Legends of the Guardians: This is our 5th movie run in 3d. This is the second movie in 3d against our competitor and the first that fits our core movie. Pre-3d, we averaged 18% of competitor's gross on the childrens/family movies. 2 movies did 30%. LoG, we have done 33% of their gross. Normally our numbers on these movies do not drop as much as as our competitor from week to week.

Just booked Jackass 3d today. We now are on pace to play 12 movies in 3d during the first year. Jackass is a movie that we not have gotten if we did not have 3d capability.

So incremental cash flow to date (not including Guardians) $10,160. I have high expectations for Megamind and of course Harry Potter 7.

Update:

Still very pleased with this system. Our competitor has had Real3d for 6 mos and our customers seem to be happy with both our systems.

3d movies still outperform the 3d movies that we play by 50-100% (not as much since out competitor began playing 3d). Our 2d movies going up against a 3d presentation at our competitor's perform pretty much 50% less than 2d vs 2d. Really trying to figure out how I can afford a Dolby 3d system to play the movies from Disney, Fox, & Sony.

If you recall from the beginning, we wanted to try to become more relevant in the minds of our market when it comes to where they want to go to see a movie. We absolutely stink on move-over movies except for the rare gem like Blind Side & True Grit. So we really wanted to climb the ranking of 1st-run theaters from seasonal to full time. I am very pleased to report that over the past 6 mos. we have opened 80% more movies on the break than the previous time period.

We have played 11 3d movies and that will be it for the 1st year. Our second year starts with Kung Fu Panda 2.