The advent of 3D films has often been touted as the evolutionary next step in the movie industry, but the road has turned out to be a bit bumpier than expected. While these films remain popular overall, the 3D experience has hardly been the groundbreaking success that many predicted. In fact, since the overwhelming success of Avatar, the industry has seen a number of 3D movies, such as Kung Fu Panda 2 and Pirates of the Caribbean, turn in disappointing performances at the U.S. box office.
U.S. consumers appear deterred by the high premiums associated with 3D tickets, especially when it comes to less action-packed titles. The overwhelming sentiment among patrons seems to be that the extra cost is often simply not worth it. Moviegoers are increasingly foregoing the more expensive 3D option in favor of the traditional format. And while this trend has hardly signaled the decline of 3D in Hollywood, (big-name blockbusters Harry Potter and Transformers did quite well), it has certainly indicated that, given the cost, customers are not going to jump at every opportunity to see a film in 3D.
Now, 3D moviemakers are moving to adapt to this trend among consumers in an effort to regain the industry’s initial momentum, as the novelty wears off. For example, studios are encouraging moviegoers to recycle the 3D glasses used to view the films, which ought to help cut costs and, in turn, keep prices down. This effort, however, has hurt 3D technology licensors, such as RealD Inc. (RLD), which generate a large portion of revenue from the sale of these glasses. Companies, like RealD, are now being forced to revamp their business models for their product segments in order to keep up with the emphasis on cost cuts characterizing the market. But if the licensors can effectively adapt, this could mean lower prices for consumers.
In addition, the new trend in re-releases appears to be a promising catalyst for future 3D ticket sales. Indeed, a number of major film studios, including Disney (DIS - Free Disney Stock Report), have announced plans to re-release their more popular motion pictures in 3D format, which ought to boost the appeal of the upcoming film slate. With titles like Titanic and the Star Wars saga finding their way to 3D screens, consumers will probably be more likely to shell out the extra couple of bucks to experience these crowd-pleasers in a new way.
Meanwhile, interest in luxury entertainment outside of the United States remains quite strong, especially considering consumers in many of these markets, including China and Latin America, still view the technology as a novelty. And momentum in the global 3D film market ought to remain strong, as more emerging regions look to bring 3D technology to their entertainment portals.
In all, it is safe to say that the market for 3D films has yet to transform Hollywood the way many thought it would. But, that doesn’t mean that this market is on its way out. Although it is unlikely that the 3D experience will become the norm anytime soon, it does represent an attractive option in luxury entertainment. It will probably continue to be considered a fancy add-on for the time being, drawing particular interest from those looking to get the most out of big-name blockbusters. But, as players in the 3D sector adjust to this niche, growth in this industry should be sustainable. In the meantime, the international arena should support the 3D market.
At the time of this article’s writing, the author did not have any positions in any of the companies mentioned.