A new dimension: How disruptive technologies will change the U.S. digital 3D cinema business model


As the first months of the new year come to a close, and with award season in full swing, it's a perfect time to take a look at the current state of cinema technology. The implementation of newer cinema technologies, especially 3D, continues to be an important barometer of movie theatre success.

Where are we today? The digital 3D industry has certainly matured in the eight years since Disney released Chicken Little and the five years since James Cameron's Avatar swept 80% of its domestic box office from 3D showings. More and more films are being released in 3D, and because of that, competition in the 3D equipment marketplace in the U.S. is heating up. Exhibitors can now be more discerning than ever before about their options.

Disruptive technologies have historically brought massive change to industries, broken up monopolies, and created cost-saving alternatives for consumers. These manufacturers of disruptive technologies will ultimately add value to the product and enhance the consumer experience.

What should exhibitors be looking for when choosing the right 3D provider? The best-quality 3D experience, as well as long-term cost-saving solutions, should be high on the list of priorities.

Introducing disruptive technologies for 3D cinema
Most U.S. theatres choose to equip 3D with passive polarization systems and passive polarized 3D glasses. Because of the passive polarization, light efficiency and color contrast are key qualities of a great system. Light-doubling systems seek to get the most light out of projector lamps. Systems using disruptive new technologies, such as Volfoni's “Triple Beam” technology, offer high light efficiency with no interfering lenses, thus preserving color neutrality. With up to 20% more light than previously available technologies, the corresponding savings in projector power, lamps and electricity, is significant. As manufacturing costs continue to come down for these 3D systems, the savings are passed on to exhibitors looking to buy or lease the highest-quality 3D equipment available.

Ending the “risk-sharing” business model of 3D

The current business model of risk-sharing (where a 3D provider takes a percentage of the box office per 3D ticket) is waning in popularity for exhibitors. Once upon a time, when 3D first reappeared in cinemas, there was a lot of risk and uncertainty. However, the 3D market is now mature, risk is under control, and the industry desires the best-quality 3D at a sustainable price. The new business model to pursue is one focused on total cost of ownership. With an overall savings of up to 50% compared to the risk-sharing model, exhibitors are now paying attention to total cost of ownership for their long-term needs. Being able to own their very own 3D system and make decisions on 3D ticket pricing is a hugely important factor when comparing 3D providers.

Changing the mindset about 3D glasses

New business models for 3D extend greatly into the realm of 3D glasses. As it stands right now in the U.S., it's up to the major studios to reimburse 3D equipment manufacturers for the number of 3D admissions (pairs of 3D glasses used) per film at theatres serviced by that specific 3D equipment provider. This model may not be sustainable in the long run, for either the studios or the 3D providers. Having disposable 3D glasses, even with recycling systems in place, is not a good business model ecologically. Many patrons complain that they have to pay a high ticket price for a 3D film's new pair of glasses, even if they bring in their very own 3D glasses that they received from last week's cinema outing. The time should be upon us where we no longer look at 3D glasses as disposable. Moviegoers should be able to purchase their own 3D glasses at the theatre and use them over and over again. For example, some moviegoers may have wanted to see Gravity multiple times, but balked at paying the 3D surcharge more than once.

Cinemas outside the U.S. give an incentive to moviegoers who bring their own glasses back to the theatre, a great concept that should be part of our nation's drive to be “green.” The U.S. has remained the only country in the world where studios must pay for glasses, and patrons are not encouraged to reuse glasses. In Europe, for example, the glasses cost $1 when purchased inside the theatre (included in the ticket price), but if the consumer brings his or her own glasses, then they receive $1 off the ticket price. On average, 50% of these consumers bring back their own glasses. It's also worth mentioning that selling 3D glasses, with various designs and styles, is an added source of revenue for exhibitors, and a new source of marketing for studios. If 3D is getting more affordable, comfortable and fun for consumers, will people go see more 3D movies? We say yes! The price reduction will certainly attract more moviegoers, and being able to bring your own glasses is more than a novelty—it is what avid U.S. moviegoers wish was possible.

Change is not easy. The status quo will always try to resist it, but ultimately progress will take place. Studios and exhibitors will need to come to an agreement about the fair distribution of savings. Exhibitors will need to look at glasses not as a burden, but as an added source of profit. As 3D cinema continues to grow around the world, especially in places like Asia, Russia and Brazil, the U.S. should look at the overseas success of the total cost of ownership model for 3D cinema and adopt it. Audiences will continue to expect high-quality 3D experiences at the cinema, and all other premium features must match the pricing set forth by a theatre. When exhibitors strive for the best possible combination of quality products, affordability and service from their 3D providers, they will be sure to receive positive feedback and the loyalty of their patrons. And the entire digital 3D cinema industry will be better off for it.