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TOPIC: 3-D Films Hit Some Speed Bumps

3-D Films Hit Some Speed Bumps 13 Apr 2010 11:30 #33746

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The two most recent 3-D releases have not lived up expectations set by Avatar and Alice in Wonderland. Theater owners probably don’t care but should studio owners?

The North American box office continues to chug along, up over 10.9% according to BoxOfficeMojo.com. Most of the press reports discussing box office attribute the gains to the growing slate of 3-D films. No doubt consumer interest in 3-D and especially their willingness to pay premium ticket prices for the 3-D experience is very good news for theater owners. However, for studios the news has been a little more mixed recently.

The massive, history-making success of Avatar (NWS), followed by the much stronger than expected performance of Alice in Wonderland (DIS) was greeted by conventional wisdom that everything in 3-D worked for studios as well theaters. Produce in 3-D from the start or convert to 3-D in post production and studios had a sure thing with more tickets sold at premium prices.

I have always been a bit skeptical of 3-D phenomenon so the rapid convergence of conventional wisdom caught me off guard. It also cost me money as my skepticism kept me out of the theater stocks. What always concerned me was that as 3-D films become commonplace, consumers would not be willing to pay the premium ticket price. Either they would pass on the film altogether or just see the 2-D version.

I also kept reminding myself that opening a film and sustaining its box office was about marketing and the quality of the film. Eventually, the consumer interest in 3-D because of the novelty would wear off.

I think the recent performance and critical response to How To Train Your Dragon (DWA) and Clash of the Titans (TWX) suggests that for the studios 3-D can be a positive but is no guarantee. Given the added production costs, rumored at $25-50 million, and what often will be incremental advertising to promote 3-D awareness, just producing a movie in 3-D is no guarantee of success. It is still about opening the film with effective marketing and sustaining the box film because the movie is good.

How To Train Your Dragon opened to a disappointing $43.7 million two weekends ago. The film showed decent but not great legs with a 33.7% drop in its second weekend. Given the fantastic reviews – 98% at Rotten Tomatoes – and the strength of the Dreamworks Animation brand, the opening significantly underperformed expectations.

What happened will always remain a guess but there a few possibilities. There has been some speculation that dragons play poorly in the US based on past dragon-themed films like Eragon. The TV ads, billboards, and trailers looked good to me but maybe they missed the mark with the target family audience. 3-D screen availability was squeezed by Alice in Wonderland the first weekend and Clash of the Titans the second weekend although analysts seemed satisfied with the screen count relative to their box office estimates. Could it be that ticket buyers just did not want to pay up for another 3-D film? Maybe they decided spending $40-60 bucks for tickets for a family of four was too much? Maybe they decided the other Dreamworks films in 2-D were good enough so why pay for 3-D? Maybe they decided that after Avatar and Alice they just did not need to see another 3-D film?

Clash of the Titans is a different story. Warners did a great job of marketing. They made the decision to convert to 3-D after the film was complete and went all in on the marketing budget emphasizing the 3-D angle. The film got panned by critics. Many critics even suggested that 3-D made the film worse! The opening weekend of $64 million including Thursday night shows met expectations but the Friday to Saturday decline was steep, often a sign that a film will not have legs. 3-D clearly helped Titans but if film suffers a huge second weekend drop profits may be elusive on a film rumored to have cost $125 million with a marketing budget that must have been at last another $50 million. More importantly for the future of 3-D, does the fact the film got panned mean that ticket buyers will be more skeptical of future 3-D action films?

The bottom line is that the last couple of weekends suggest that the future of 3-D profits for studios may not be as simple as it seemed. With the coming surge in 3-D releases, consumers may become more discriminate in what they pay up for or pay to see at all. Constraints due to lack 3-D equipped theaters will quickly dissipate. A year from now will early industry and consumer fascination with 3-D prove to have been overhyped? I think so. I just hope my view still is not costing me money?

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