3D: Not dead, but headed for a niche

The New York Times has an article about the back-to-back poor boxoffice performance of 3D versions of "Pirates of the Caribbean: On Stranger Tides" and "Kung Fu Panda 2". "Pirates of the Caribbean" only sold 47% of its tickets in 3D, and "Kung Fu Panda 2" only sold 45%, even though both movies were heavily promoted as 3D titles. In fact, 3D's share of boxoffice revenues has been declining almost since "Avatar" left the theaters. Audiences are getting tired of movies that were originally shot in 2D and then poorly converted to 3D (like "Clash of the Titans" and "Thor"), along with the low brightness, glasses and headache-inducing qualities of 3D as shown in most theaters, and, perhaps most importantly, the steep ticket prices.

As the New York Times points out, the movie studios have a bumper crop of 3D titles coming out this year, and the industry has become dependent on 3D's higher ticket prices to try to compensate for declines in DVD sales and the failure of Blu-Ray to pick up the slack. It now appears that 3D isn't the "Hail Mary" pass that the movie industry was looking for.

That doesn't mean that 3D is dead, but it does mean that the studios will have to become a lot more selective about the movies they release in the format. 3D needs to be reserved for "event" movies that can truly take advantage of the effect--the novelty of 3D for its own sake has worn off. Studios also have to drop 2D to 3D conversions; the audience has caught on, and we're rapidly approaching the point where it will cost more to do the conversions than the incremental revenues that movies will earn with 3D.

The studios also have to, once and for all, get over their spending addictions. DVD sales underwrote a wild period of production and marketing cost escalation, but since the Great Recession, the studios have been looking for replacements for DVD revenues like crack addicts looking for a fix. It's time for the studios to go into rehab. Average production costs of $150 million or more have got to drop to more reasonable amounts. The studios can easily afford 3D becoming a niche format for special events, but only if they bring their spending in line with market realities.