Is 3-D dead in the water? A box-office analysis.

Arts, entertainment, and more.
Aug. 24 2010 6:15 PM

Is 3-D Dead in the Water?

A box-office analysis.

Also in Slate, Daniel Engber and Dana Stevens debate whether 3-D makes movies any better to watch.

(Continued from Page 1)

It's important to keep in mind that this "switch-one-screen" idea rests on the (shaky) assumption that demand for 2-D and 3-D are more or less interchangeable. In fact, the people who watched a movie on a flat screen may not have been willing to see it on IMAX, and the reverse is also true: It's possible that someone who saw Avatar in 3-D would have skipped the movie altogether if it were only showing flat. Still, the bonus per-screen revenue that a movie gets from 3-D does yield some useful information.

Let's go back to our example: Despicable Me managed to outperform the mighty Avatar at flat screenings, yet Avatar pulled in a lot more money overall. That's because its 3-D revenue boost was so much higher (70 percent versus 2 percent). But if you run the same calculation for other movies, it turns out that Avatar's 70-percent bonus is itself quite low, relatively speaking. In fact, three-dimensional cinema appears to have been in a tailspin ever since it reemerged in 2004.

The chart below—created with enormous help from Slate designer Holly Allen—shows the ratio of 3-D revenue to 2-D revenue, on a per-screen basis, for almost every major three-dimensional release going back to the beginning of the current revival.  

3D VS. 2D, 2004-2010

Here's the simplest way to interpret this graph: 3-D has been getting less and less profitable, relative to 2-D, over the past five years. It's an ominous, downward trend that started long before Avatar and Alice in Wonderland and continued after. (The red dotted line represents a break-even point, where screenings in 3-D and 2-D theaters make exactly the same amount of money.)

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The trend begins at what I take to be the start of the revival—the November 2004 release of The Polar Express, the first-ever IMAX 3-D feature. That film opened in 3,650 theaters around the country, of which just 59 were equipped to show in 3-D. But the revenue from each of those premium screens was almost $40,000, compared with $6,000 for flat-showings. At the beginning, the 3-D bonus was an incredible 575 percent.

Only a handful of 3-D movies came out over the next few years, but the format already appeared to be losing ground. Beowulf opened at 742 3-D theaters in the fall of 2007 and about 3,150 theaters overall. When you compare the 3-D showings to the ones in 2-D, the added revenue was 135 percent.

Flash-forward two more years, to Christmas 2009, and the undisputed king of 3-D movies, Avatar. As we've seen, the extra revenue from the sci-fi epic's 3-D screenings was 70 percent. When Alice in Wonderland came out three months later, the bonus had dropped to 53 percent. This past May, Shrek Forever After saw a boost of 48 percent. In July, The Last Airbender managed just 24 percent.

Then we come to the weekend of June 18, 2010, when Toy Story 3 opened in more than 4,000 theaters around the country. It was a huge weekend for the Pixar film—one of the biggest of all time, in fact, with more than $110 million in total revenue, and $66 million from 3-D. Yet a close look at the numbers shows something else: On average, Toy Story 3 pulled in $27,000 for every theater showing the movie in 3-D, and $28,000 for every one that showed it flat. In other words, the net effect of showing Woody, Buzz, and friends in full stereo depth was negative 5 percent. The format was losing money.

3D VS. 2D, SINCE 2009

What explains this downward slide in 3-D? According to one common theory, Hollywood has sabotaged the medium by upgrading flat movies to 3-D in postproduction—a process that yields an inferior product. Critics point to the murky, cardboard-looking Clash of the Titans as the standard-bearer for lousy stereo conversion. But for all the bellyaching, that movie did just fine in its 3-D showings. Relative to flat screens, 3-D showings produced an additional 49 percent in revenue.

The curmudgeons are just as likely to blame the decline of 3-D on outrageous ticket prices. There's always been a premium for IMAX and RealD screenings, but theater chains jacked up the cost of 3-D tickets even more this past March. Some predicted that the money grab would suffocate demand and cut profits. In fact, the price increase seems to have had no effect whatsoever on the gradual deterioration shown on the charts above. There's no sign of a precipitous fall-off.

Here's another explanation for the decline: People are getting bored; the novelty is wearing off. When The Polar Express came out in 2004, and Beowulf in 2007, there was more incentiveto see them in 3-D—flat screenings seemed beside the point. But that's no longer the case. Now the decision to see a movie in 3-D is based on a more rational calculation of added costs and potential benefits. I happen to think that Toy Story 3 looked great in three dimensions—well worth the extra dollars. But America may not agree.

In fact, the few movies that still make a significant bonus profit from 3-D screenings are those that have "3-D" in the titles. There have been only three of these in my sample— My Bloody Valentine 3-D, Step Up 3-D, and Piranha 3-D—and their 3-D theaters have benefited from markups of 481 percent, 42 percent, and 131 percent, respectively. (I separated those data out in the charts above.) That makes perfect sense: Why would anyone bother to see a movie called Piranha 3-D in 2-D? But if these are the only movies that can pull a major added profit from 3-D, that's bad news for Hollywood. The studios don't want the medium to be relegated to genre flicks with limited audiences. They're hoping people won't need the cue of a "3-D" title to shell out for high-priced tickets.

Given all the evidence presented here, I believe that audiences are gradually losing interest in 3-D movies. But there's still the caveat about whether 3-D revenue and 2-D revenue are really interchangeable. It's possible to interpret the declining numbers another way. It may be that interest in 3-D has remained constant while the number of 3-D theaters has increased. In the first few years of the revival, a new movie would be rolled out on a few hundred 3-D screens. Now it gets shown on a few thousand. (The numbers are still going up: By the end of 2010, more than 5,000 3-D screens will be available.) So we may be as excited as ever about things popping off the screen—only now we've got more places where we can spend our 3-D money. In other words, a growth in theater capacity is diluting per-screen profits.

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