BTIG Research Report on Final Harry Potter and 3D Systems

Source: BTIG Research website (registration required)

RealD continually touts its equipment as creating a superior visual 3D experience, relative to competitors: MasterImage, Dolby, and Xpand. However, it does not appear that Warner Bros. agrees. Warner Bros. did not feel that RealD offered an adequate enough experience for the London Premiere of the final installment of Harry Potter and actually paid to have RealD 3D equipment taken out and replaced with Dolby 3D equipment (with a new projector added to improve the 3D brightness).

Yet the Odeon cinema chain in the UK appears to have no problem showcasing movies in RealD 3D to their customers – look at the following descriptions on the Odeon website:

“The ODEON digital 3D magic is powered by the RealD Cinema System, a ground-breaking digital cinema projection system.”

Questions Raised by UK Potter Premiere Technology Change:
• Why does Warner Bros. prefer Dolby to RealD?
• If the largest studio in the US does not believe that RLD’s technology is adequate for its premiere event, why are they not pushing for technology change at the exhibitor level? Or are they? It is worth remembering that AMC, Cinemark and Regal all took options in return for RealD exclusivity in the US. We continue to believe these exclusive relationships in the US were a short-sighted decision – the three majors would have benefited from robust competition in the US (similar to what we are seeing overseas, click here).
• Can the 3D brightness issue be solved in an economical way?

3D’s Brightness Problem. Unlike guests at the UK 3D premiere of Harry Potter, US moviegoers are not so lucky and are usually stuck watching 3D movies with RealD technology (the IMAX 3D experience is better, but the number of IMAX screens even for Potter is only 274 in the US). The US consumer is tiring of 3D and it goes well beyond the higher cost issue (even where 3D ticket premiums are low, consumers are favoring 2D), with the annoyance of wearing glasses and brightness increasingly driving consumers back to 2D movie viewing. In the near-intermediate term, we do not believe there is an economical way to fix the brightness issue:
• Adding extra projectors for 3D showings. Projectors are expensive and theater owners do not like to spend their own money (reason for using RLD in the first place).
• Turning up brightness. Implored by Michael Bay for Transformers 3, but also expensive. This is so expensive that theater owners often use bulbs and projectors well past their useful life to save cash. Lenny Lipton, who invented the technology utilized by RealD was quoted on this issue in yesterday’s WSJ.
• Turning up gain. Would result in a brighter image for most in the theater but would introduce hot spots, and potential color problems.
• Eventually, lasers should replace bulbs and provide a brighter 3D image, but it will be some years before this becomes feasible/economical on a wide scale.

Lack of Quality Control by Exhibitors. Exhibitor quality control has compounded the 3D problem and is actually leading to a degradation of the viewing experience for 2D movies. Switching theaters between 3D and 2D is not so easy when it involves a Sony 4K projector (favored by Regal and Cinemark), with theater owners often showing 2D movies on projectors set up for 3D, hurting the viewing experience.
• One of the advantages of Dolby’s 3D solution versus RLD is that it actually detects 3D content versus 2D, so theater operators do not have to take any additional action based on whether a 3D or 2D film is showing.

Potter Tickets Sales Skewing Toward 2D

Today marks the US release of Harry Potter and the Deathly Hallows Part 2. The final Potter, along with Transformers 3 were supposed to be the major 3D releases of the summer with RLD “bulls” expecting 70-80% of box office for these films to be in 3D including IMAX 3D. While Transformers 3D box office share of 60% (52% 3D and 8% Imax 3D) was well above recent underperforming 3D films such as Panda 2, Green Lantern, Cars and Pirates, it still fell well short of where top 3D films were performing last year.

We expect the final Harry Potter to generate about half its box office from 3D with IMAX likely generating north of 10% of that, with nearly 60% of tickets sold likely to be for 2D showings.
• The Pulse section of the Fandango app has shown 2D Potter ticket sales outpacing 3D for the past couple of weeks of pre-sales, with 2D currently #1 in Top Sellers.
• Potter is being released in the US on 11,000 screens including nearly 4,000 non-IMAX 3D screens, 274 IMAX 3D screens and 6,700-plus 2D screens (implying roughly 60% of screens showing the film this weekend will be 2D).

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3 Responses to BTIG Research Report on Final Harry Potter and 3D Systems

  1. Fred says:

    One part of this article is incorrect Cinemark did not choose to go with Sony projectors they purchased Barco for their digital conversion.

    • Joe says:

      Thanks for catching the error. The author of this report appears to have confused Cinemark with either Regal or National Amusements, both of which were mentioned in the Boston Globe article that first brought the SONY 3D issue to light. The lense attachement is licesnsed to REALD for exclusive use in the United States, Canada, and Europe.

      In March of this year, I visited with Barco Digital Cinema’s senior executives for North America at their headquarters in Rancho Cordova, CA. An article based on this visit appeared in Vol. 14, No. 3 (March 2011) of the LF Examiner. In it, I wrote about how Cinemark is in the process of switching all their XD theaters to Barco’s new 4K DLP Cinema projectors. All of their digital auditoriums have used Barco’s 2K projectors for years.

      Joe Kleiman
      The Kinotech Blog

  2. Jody says:

    As a normal moviegoer that saw the latest Harry Potter movie in IMAX 3D, Regular 3D, and Normal, I can say that my favorite was the normal screen size in 3D. With IMAX 3D, the detail seemed to be a bit more washed out…perhaps it was the larger screen size…perhaps it was the brightness issue…not sure.

    I still hate having to wear glasses because of the annoying glare that you have to get used to, but overall it was not too bad.

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