Market Watch

Big Hits to Kick Start Catalogue 3D Conversion

October 20, 2010

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Recent announcements regarding the 2D-to-3D conversion of one of the biggest individual box office hits and two of the most lucrative film franchises of all time suggest that Hollywood is becoming increasingly confident that - given sufficient time - 3D conversion technology will be able to deliver a compelling audience experience.

  • Paramount and Twentieth-Century Fox will re-release James Cameron's 1997 film Titanic theatrically in 3D in April 2012 to coincide with the centenary of the ship's sinking.
  • Lucasfilm and Fox will release a 3D conversion of 1999's Star Wars: Episode I, The Phantom Menace 'between February and April 2012'. The title is not even scheduled for a Blu-ray release until 2011.
  • The remaining five films in the Star Wars canon are scheduled for release at a rate of one a year thereafter, depending on the performance of the first title.
  • Warner will convert episodes five and six in the Harry Potter franchise (Order of the Phoenix and Half-Blood Prince respectively) in order to release them on 3D BD, although no schedule has been announced.

While the rationale for including a 3D version of a new release is now well-established, these announcements show that studios are keen to investigate 3D's potential to resurrect major box office titles, both theatrically and on home video. So far such experiments have been limited: Disney's re-release of Toy Story 1 and 2 in 3D generated $30m at the box office in the US alone, as well as raising consumer awareness of the franchise as a 3D vehicle in time for the release of Toy Story 3. Meanwhile, the same studio's Nightmare before Christmas, first released in 3D in 2006, has become a perennial 3D release. However, the recent re-release of Fox's Avatar, in an extended version, generated just $10m at the box office, while Disney has repeatedly postponed the 2D-to-3D conversion of Beauty and the Beast - originally scheduled for 2010, then 2011, and now pushed back to '2012 or later', a decision that Screen Digest understands is to ensure sufficient revenue generation from the theatrical and subsequent BD releases to cover the costs of conversion.

Warner's Harry Potter announcement comes shortly after the studio cancelled the planned 3D theatrical release of November's Harry Potter 7 citing insufficient time to 'meet the highest standards of quality' (see separate Analyst Commentary). By confirming its continuing interest in making titles in the franchise available in 3D, however, the studio reinforces the perception that not only is it confident that the desired quality threshold can be achieved given sufficient time, but also that it would prefer to spend the necessary time (and money) to achieve this, than risk disappointing Harry Potter fans.

Similarly, the long lead times announced for Titanic and Star Wars, together with the renowned attention to detail of their respective directors, are likely to reassure those fans whose think their only experience of 2D-to-3D conversion so far is Warner's Clash of the Titans, converted in less than 10 weeks and widely considered to be poor. (In fact, of course, many live action 3D titles include converted footage.) By announcing early, the studios can show their support for 3D now, while waiting until the market is more mature to actually re-release their crown jewels.

By 2012 Screen Digest expects there to be over 24,000 digital 3D screens in theatres globally (up from 14,000 at the end of June 2010) while 13.8m households worldwide will have at least one TV set capable of 3D display (3.3m this year). The number of 3D TVs is arguably even more important than the number of 3D cinema screens. Spending on physical video may be declining but it is still the largest revenue generator for Hollywood and a theatrical re-release - even in 3D - is really just a 'shop window' for the subsequent BD and DVD release. Without a substantial installed base of 3D BD-enabled TVs (ie, connected to a 3D BD player or PS3 and with the requisite glasses), studios will find it hard to justify the $10m-$15m cost of converting even hit 2D movies to 3D.

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