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Investors were mulling over earnings reports from Regal Entertainment and RealD after the closing bell on Thursday looking for clues as to the health of the exhibition industry. Their conclusion: 2D good, 3D bad.

In after-hours trading, shares of RealD were collapsing to an all-time low, shedding nearly 21% of their value after rising 3% to $18.42 in the regular session.

Earnings for Regal, on the hand, were called by one analyst, Michael Pachter of Wedbush Securities, “good” and the stock was up more than 6% in the after-hours session.

RealD posted quarterly revenue down 8% to $59.6 million and net income that fell 5% to $9.4 million.

Chairman and CEO Michael Lewis told analysts on a conference call Thursday that they should spend less time focusing on the percentage of tickets sold in 3D and more time looking at the total dollars generated by those sales.

Lewis, citing rough estimates, used Harry Potter and the Deathly Hallows Part 2 to illustrate his point. The film made more than $500 million worldwide opening weekend with half coming from 3D, he said, yet “media and pundits” called it “a disaster and disappointing” for 3D.

“I’ll take one of those disasters every weekend,” he said.

Lewis also boasted of a 133% year-over-year increase in RealD screens to 17,500, and he said results would have been better except for “competition for 3D screens domestically” that “clearly had a limiting effect.” Before earnings, in fact, RealD disclosed that AMC agreed to install RealD in up to 1,000 additional screens in the U.S. and Canada.

Judging from the reaction of the stock, down almost $4 a share in after-hours trading, analysts and investors weren’t buying into the CEO's positive perspective.

Lewis also said on a few occasions Thursday that exhibitors and studios were discussing lowering the premium charged to see a film in 3D – “everybody is addressing the tough economic times,” he said, but if a price decrease is coming it won’t immediately harm RealD’s business because its royalties are “locked in.”

Lewis also said that RealD took a small hit internationally because so many consumers were reusing 3D glasses, negating the need for purchasing new ones.

As for Regal, the exhibitor reported a 3% rise in revenue to $753 million while net income surged nearly 650% due to tax advantages and cost savings.

The company declared a 21-cent per share cash dividend, reiterated its intention to regularly pay quarterly dividends and said it was “encouraged by the early third quarter box office results and the prospects for the remainder of the year.”

The results were in stark contrast not only to RealD but also to Imax, which said Thursday that a weak film lineup led to poor second-quarter results. That revelation caused Imax shares to drop 17%, or $4.21 on Thursday to $20.21.

In breaking out its quarterly revenue, Regal said Thursday that ticket sales rose 2.6% to $519.3 million, concessions were up 3.3% to $200.2 million and the category of “other” rose 5.3% to $33.8 million.

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Lewis also said on a few occasions Thursday that exhibitors and studios were discussing lowering the premium charged to see a film in 3D – “everybody is addressing the tough economic times,” he said, but if a price decrease is coming it won’t immediately harm RealD’s business because its royalties are “locked in.”

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Which is why you will not see a decrease of much significance. If the fee is reduced to $1 the exhibitor would be better off selling a 2d ticket. $.50 of that $1 goes to Reald, approx. 55% of that $1 goes to the studio.

A lowering to $2 would probably not be enough to entice price conscious customers.

Reald will have to be willing to lower their royalty.
 

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Posted by John T. Hendrickson, Jr (Member # 849) on 07-29-2011, 10:37 PM:
 
No problem for RealD. Next thing you know all the execs will be telling investors and exhibitors that 3D is going to stage a huge comback in 2012.
 

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Posted by Jesse Skeen (Member # 586) on 07-30-2011, 05:25 PM:
 
Drop the premium charges ALTOGETHER already!
 

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Posted by Steve Guttag (Member # 268) on 07-30-2011, 07:05 PM:
 
Then Real-D stock drops to zero because they won't make any money. Something has to cover their per-ticket charge and the Studios take their percentage on any up charge so one has to charge that much more to cover Real-D out of their take.

Real-D is the dominate 3D delivery system so I don't think you'll see it dropped any time soon. We do have one MasterImage customer that has eliminated the up-charge.

-Steve
 

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Posted by Frank Angel (Member # 248) on 07-30-2011, 10:07 PM:
 
I don't quite understand -- what does RealD 3D DO in terms of providing a unique system? 3D based on a polarization and a silver screen have been around since the 50s. The studios didn't need a 3rd party to install or manage or whatever RealD does for 3D, to work back then. All the theatres needed was a company to sell them polaroid glasses and filters for the projectors. Even the selsyn motors were installed by the regular theatre service companies. None of that required royalties to a 3rd party.

The studios got together and decided on the polaroid system for their 3D movies and it was universal - there weren't different systems managed by different 3rd parties and to the best of my knowledge there were no surcharges for 3D.

Same with the under-over system of the 80s. Then there was IMAX 3D 15/70 which they were showing since the late early 90s and it too was polarized 3D and again, there was no 3rd party interloper. How, and more interestingly, why did ReadD ever get a foothold and involved with showing 3D and being able to levy a royalty for a system that has been around for half a century? I would think BOTH the studios and the exhibitors from the get-go would resist any arrangement that threatened to take even a penny of their ticket income.
 

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Posted by Victor Liorentas (Member # 5272) on 07-30-2011, 11:56 PM:
 
That is a very GOOD point Frank!
 

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Posted by Louis Bornwasser (Member # 3063) on 07-31-2011, 06:34 AM:
 
Frank" Real D gets no revenue from the studio money. It is totally an "exhibitor-thing." I do believe those guys will buy ANYTHING. Louis
 

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Posted by Steve Guttag (Member # 268) on 07-31-2011, 07:18 AM:
 
Actually, it isn't a good point...

What Real-D did was allow a single DLP projector to project a stereoscopic image. Unlike film, which used a split lens with two fixed polarizers, Real-D, with the Z-screen came up with a polarizer that switched, very rapidly, and in sync with the projector, the circular polarization that was applied to the image.

While the Infitec (Dolby like) single projector 3D system existed, it did and does not have the cost advantages, at the start that Real-D offered.

As such, Real-D got a BIG jump on the others, "Real" jump. It remains the cheapest cost of entry into 3D. Exhibitors that choose it often site "not having to deal with the glasses" (in terms of collecting, cleaning) and little to no cost of entry into 3D. Yes, it is the most expensive, but the pain is slow since one only sends a check after the tickets are sold. The other offerings are all up-front costs. However, these costs need to be recouped or there is no point in offering 3D and hence the up-charge.

As for film...3D in the 50s with dual-projectors was indeed a rather low-cost system. One needed polarizers (relatively cheap), a silver screen (long-term cost distribution so low-cost per-year) and selsyn-motors to keep the projectors in sync. (and I've heard of some that linked the motors with a gear-belt in lieu of selsyn (though I've never seen this set up nor pictures of it). In short, 3D in the 50s was relatively low-cost and the cost was not on-going.

In the 80s, it seemed like each 3D for the first year or two had a different lens system and the lenses were "rented" from companies like Stereovision (the most popular) and 3D was not so prevalent that one need own a lens. The glasses remained the cheap paper-frame things too. It was done on the cheap. It wasn't till the end that lenses that could be used with all over/under systems came out and the notion of purchasing a 3D lens started to make some sense...but then 3D ended (thankfully) and that was that. But again, the expense of showing it was minimal...mostly the screen...which could show 2D movies too.

With digital, what some just don't seem to get is the enormous expense it is to add to a 2D theatre...it is not like film. The apparatus itself is expensive, the extra light needed is expensive. And if one goes the Real-D route to not have the big upfront costs (but still likely to need more light), you now have a "partner" collecting money. No matter how you cut it, with digital 3D it costs significantly more to show than 2D. If 3D doesn't cover its up-costs, as a business, there is no point in fooling with it.

-Steve
 

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Posted by Frank Angel (Member # 248) on 07-31-2011, 07:47 AM:
 
Well, it wasn't a point I was making, but just asking a question. And the answer, from what you say seems to be that, that unlike previous film 3D systems which required only filters on the projectors, digital ReadD 3D uses their Z-screen (patented, I presume) on the projector and that is what the exhibitor is paying royalties for, correct?

It would be interesting to see if they could do over/under with digital...dig out the old Stereovision lenses.

BTW, I have also heard of that mechanical interlocking method using a belt on the motor shafts between the two projectors. Can you imaging working with that belt wizzing around between the two machines?! Talk about primative.
 

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Posted by Steve Guttag (Member # 268) on 07-31-2011, 09:10 AM:
 
Frank,

The Sony/Real-D system is just that...an over/under system. The problem is the resolution...it relegates a 4K system to 2K...and worse than that, the total height of each image is 858, not 1080 since there needs to be a space between images. This yields two scope images of "2K" like resolution but fails at Flat since now FLAT is reduced to 858 x 1587...not even Home HD. Note film 3D also has issues with flat with the over/under systems for the same reason. Also, when film 3D was in its heyday(s), Scope images were WIDER (side movable) so if a Flat movie were to be produced...it used the same system. In the digital world, most cinemas now make Flat TALLER which means changing the focal length of the lens (zoom).

So an over/under 3D, while dispenses with the time-varient artifacts (both eyes are projected at the same time), it does inherently have resolution issues. This is a case where Real-D doesn't bring anything to the table yet has been able to collect royalties on their Real-D XLS lens (just a dual lens) with fixed polarizers.

Ad it begets the whole stupid running 2D movies with the 3D lens still in place...which, as I said, caps the resolution at 858 pixels tall..IF the installer gets the overlap perfect. Any misalignment comes off of resolution...a problem that Real-D XL in the DLP world suffers from. People judge this stuff from the booth too much. Put up a good crosshatch pattern like NEC's framing pattern and go down to the screen and look over the entire image...if those pixels do not align PERFECTLY over the entire image, your resolution just dropped. If you have a FLAT screen...you can get it pretty close unless the projection angles are great...if you have a curved screen...forget it. Without a doubt, as for Real-D, the best looking images are with the Z-screen, not the XL. However, the XL is twice as bright (half as bright a lamp is needed) so guess which one is favored?

-Steve
 

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Posted by Monte L Fullmer (Member # 2797) on 08-01-2011, 04:15 PM:
 
Ive' seen flat screened locations use the "Z" - mainly for small port windows, but the 3D image is sharper.

(and as for the two machine, toothed belt setup that Steve mentioned: one small theatre that I worked at with XL units and SH-1000's, had a set of pulleys that would replace the turndown knobs on the front of the motors and that long belt with a tensioner setup to keep the belt taught between the two machines .. and the mounting of 6k magazines for the bigger reels.)

Thus, it could be an "Achilles heel" with these "big box" cinemas with curved screens shooting Real D if they can't get the resolution down to a pinpoint then.

And this could be the argument that the media/public is hollering about with shooting 2D through a 3D setup.
 

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Posted by Victor Liorentas (Member # 5272) on 08-01-2011, 09:19 PM:
 
Every time I think about RealD and the aggressive push for digital and silver screens I wish Dolby had successfully beat them to the punch even with digital projection. If I had to make any point it would be RealD is not needed in my perfect little world! Can it go away now please?
 

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Posted by David E. Nedrow (Member # 4981) on 08-01-2011, 10:49 PM:
 

quote: Steve G

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but fails at Flat since now FLAT is reduced to 858 x 1587...not even Home HD.

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I think this falls well within the defined HD standards for broadcast and recorded media, right? Assuming you've just got your values reversed, 1587 x 858 is higher than WXGA which makes it at least equal to 720p.

Or am I just misreading something?
 

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Posted by Steve Guttag (Member # 268) on 08-01-2011, 11:49 PM:
 
Theatres normally use H x W...Vidiots have traditionally used W x H...hopefully that hasn't stumped you. Is 858 x 1587 more than 720P (1280 x 720)...yes...however, you will find that 720p a non-growning segment of the home market...it only gets any use by those worried about motion artifacts like sports (ESPN) since the home 1080 format is the evil interlace of 1080i. However, for movies, with BluRay and such, 1080p is becoming the norm as the players and displays can almost all deal with it.

Thus, in the home, most all movies are 1920 x 1080... 1.85 movies, if the ratio was preserved (though it rarely is since 16:9 is so close) would be 1920x1038. Theatres would still have an edge on scope since home is 1920x804. But seriously, a theatre with a screen many times the size of a home screen should not be competing with similar resolution, let alone lower!

-Steve
 

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Posted by Frank Angel (Member # 248) on 08-02-2011, 06:01 AM:
 
Wow, Steve, that is really shocking; I was almost going to say that it seems that Hollywood has set exhibition backwards in order to push 3D as its savior and has done it without any consideration for the palpable, negative impact it has on image quality. It seems like, except maybe for IMAX Digital 3D, "standard" one projector digital 3D was terribly conceived and, worse, they don't seem to care but just keep pushing ahead, to a cinema experience of possibly LESS quality than home theatre.

For most of its history, cinema technicians, researchers, inventors, have mostly labored to make film presentation BETTER. Innovations rarely were designed to DEGRADE presentation, except for that one foray into mediocrity when UA and Technicolor teamed up to diabolically hoist the 3 sprocket frame "long play" print on us in order to save on shipping costs and print-to-platter labor. Luckily that went nowhere. Little did we know they had their sights on a much bigger prize -- getting exhibition to save them money by installing digital. And I may be cynical here, but I truly believe the REAL reason 3D is being pushed so hard, regardless of its impact on screen image quality, is solely to expedite a speed-up of digital conversions; they rushed to 3D with what seems like terribly little regard for quality.

At least in the 50s, the second eye was an additive process for both brightness and I would guess at least the perception of better resolution; it certainly didn't REDUCE resolution. The 80s system wasn't nearly as good, but then again, at least both eyes saw the image at the same time and its run was mercifully short.

And believe me, this is hard for me to say as this lad simply LOVES 3D; I have seen both dual projector film 3D and dual projector digital IMAX 3D -- both are additive systems they result in a 3D image Done Right (I've yet to see Dolby 3D). Unfortunately, given the pervasive use of ReadD, me thinks we are going to be stuck with this inferior system for a long time. Hell will freeze over before exhibitors install a SECOND projector for high quality 3D presentation.
 

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Posted by Brad Miller (Member # 2) on 08-02-2011, 06:19 AM:
 
Frank, why does almost every post of yours go on and on about how digital is so awful, yet it is clear you haven't been involved enough to actually know one way or the other? It's time to get with the program buddy. Film will be gone in a couple of years here in the US. Nothing, and I do mean nothing...not even complaining posts here on this forum...will stop it.

Cinema digital is NOT inferior or even equal to consumer HD. Anyone that says it is needs to be slapped. Consumer HD looks pretty lousy for the most part (particularly HD tv), although some blu-rays are pretty good. There is MUCH MUCH MUCH more than a friggin' pixel count to affect final quality.

I hope I didn't offend. If you want something valid to complain about, how about the content of the movies these days?

Also you really need to check out Dolby 3D. It is the best of all the digital 3D formats and if you are a fan of 3D you will be quite amazed. Be sure to turn your head sideways too.
 

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Posted by Frank Angel (Member # 248) on 08-02-2011, 08:41 AM:
 
Brad, you don't offend -- but, you do misread me sometimes. What I criticize in the post above is specifically RealD THREE DEE, NOT digital. And I base the criticism on how it screws with resolution and brightness. So let's just set the record straight, I have no grip with digital -- haven't for a long time since I have seen how good it can look when it's done well. I don't know how many ways I can say it. Digital is here; it's the way commercial cinema will be shown and when it is done well -- again I point to IMAX digital, both 2D and 3D, which I have said over and OVER, looks quite stunning -- it certainly does the job.

But given what I have seen of single projector RealD 3D, I and lots and lots of people say it produces lifeless, dull images, especially in the theatres where it seems they try to get pictures bigger than they should, or the system they installede is undersized. I think even you will admit that there can be digital done wrong just like there's film done wrong.

Then comes Steve's eye-opening numbers which tell how resolution takes such a big hit by the RealD system, it is clear to me that Hollywood rushed into 3D without carefully evaluating if they could actually produce a decent 3D image. And what is worse in my mind is that they seem to have rushed into 3D specifically to motivate exhibitors to jump to digital to save THEM money, NOT because it is a particularly good system.

And yes, I do want to find a Dolby 3D screen to check that out. It probably won't be too hard for it to look a lot better than RealD 3D.
 

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Posted by Chris Slycord (Member # 4239) on 08-02-2011, 09:34 AM:
 

quote: Frank Angel

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Then comes Steve's eye-opening numbers which tell how resolution takes such a big hit by the RealD system

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quote: Bobby Henderson

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still image files encoded in JPEG 2000 format.

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quote:

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But seriously, a theatre with a screen many times the size of a home screen should not be competing with similar resolution, let alone lower!

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quote: Chris Slycord

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In short: those numbers apply to Sony projectors only.

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