2-D Leads Box-Office Comeback Showing 3-D Miscast as Hollywood Savior

Photographer: Warner Bros./Courtesy Everett Collection

Outperformers also include a pair of raunchy comedies, "The Hangover Part II" and "Bridesmaids," and last weekend's science-fiction thriller "Super 8." Close

Outperformers also include a pair of raunchy comedies, "The Hangover Part II" and... Read More

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Photographer: Warner Bros./Courtesy Everett Collection

Outperformers also include a pair of raunchy comedies, "The Hangover Part II" and "Bridesmaids," and last weekend's science-fiction thriller "Super 8."

Comedies and dramas filmed in the old-fashioned two-dimensional format are leading Hollywood’s summer box-office revival, calling into question studios’ investment in more costly 3-D extravaganzas.

The season’s biggest surprises include Universal Pictures’ “Fast Five,” a 2-D action film that relied on car chases and shootouts to generate $206 million in U.S. ticket sales. Outperformers also include a pair of raunchy comedies, “The Hangover Part II” and “Bridesmaids,” and last weekend’s science-fiction thriller “Super 8.”

Studios are finding that slapping 3-D technology onto a film doesn’t guarantee audiences, and relying on the format can be a drag on the stock. Production surged after James Cameron’s “Avatar” became the top-grossing movie ever. In the rush to capture premium ticket prices, Hollywood made pictures in three dimensions without first mastering the technique, said Jeff Bock, an analyst with Exhibitor Relations Co.

“Attendance has been falling off for three years, and 3-D was supposed to be the savior,” Bock, who is based in Los Angeles, said in an interview. “With the 3-D rush jobs we’ve had over the past two years, people are getting an inferior product.”

Among the recent 3-D disappointments are “Kung Fu Panda 2,” which drew 45 percent of its U.S. opening-weekend audience in the format, and “Pirates of the Caribbean: On Stranger Tides,” with 46 percent. Globally, Walt Disney Co. (DIS)’s “Pirates” is the year’s biggest-grossing picture with a haul of $913 million.

Stocks Drop

Investors have punished shares of companies whose fortunes are tied to 3-D’s success. Glendale, California-based DreamWorks Animation is down 16 percent in Nasdaq Stock Market trading since the May 26 opening of “Kung Fu Panda,” which sold a smaller percentage of 3-D tickets than previous DreamWorks movies.

RealD Inc. (RLD), the Beverly Hills, California-based provider of 3-D exhibition equipment, has dropped 26 percent in the past month in New York Stock Exchange composite trading, and San Francisco-based Dolby Laboratories Inc. (DLB), a smaller competitor in the format, is off 9.5 percent over the same period.

The percentage of box-office sales tends to vary widely depending on whether audiences believe 3-D adds to the experience, according to Martin Pyykkonen, an analyst with Wedge Partners in Greenwood Village, Colorado.

“Avatar,” released in 2009, generated 71 percent of its opening-weekend sales from 3-D showings, according to Rich Greenfield, an analyst with BTIG in New York. Audiences conditioned to watching the “Pirates” movies didn’t consider 3-D essential to the story, Pyykkonen said.

Closing Gap

Warner Bros.’ “Hangover,” the year’s biggest-grossing movie to date in the U.S. and Canada with $221 million, No. 2 “Pirates” and “Fast Five,” in third place, have helped to close the gap in ticket sales from last year. As of last weekend, the year-to-date decline narrowed to 8 percent from 15 percent since the May 1 start of Hollywood’s traditional summer season, according to researcher Hollywood.com Box-Office.

Bock has predicted that the domestic box office will hit $11 billion this year, up from $10.6 billion in 2010, in part because of the extra $3 or so per ticket moviegoers pay for 3-D and Imax Corp. (IMAX) widescreen viewings.

The ticket price may have been too high in some cases, Chase Carey, chief operating officer of Rupert Murdoch’s News Corp., said on a March 7 conference call.

Producing a film in 3-D can add as much as 30 percent to the budget for a live-action movie and as much as 20 percent for animation, Pyykkonen said.

‘Lantern,’ ‘Transformers’

More is on its way. Warner Bros.’ “Green Lantern,” with Ryan Reynolds starring as the DC Comics character, is expected to generate $50 million in ticket sales domestically when it opens this weekend and $135 million during its theatrical run, the forecast of researcher BoxOffice.com. The 3-D film cost about $150 million to make, Internet Movie Database estimates.

Director Michael Bay’s “Transformers: Dark of the Moon” may rekindle enthusiasm for the format, said Pyykkonen.

Audiences are drawn to Bay’s heavy use of visual effects, just as they are to Cameron, who spent a decade developing the camera system and techniques used to film “Avatar,” Pyykkonen said. That movie generated $2.78 billion in global ticket sales for News Corp. (NWSA)

“Dark of the Moon,” the third in Bay’s series about a race of robotic aliens, is set to be released on June 29 by Viacom Inc. (VIA/B)’s Paramount Pictures and stars Shia LaBeouf and Rosie Huntington-Whiteley.

“It will be the next interesting test as to what the market really thinks,” Pyykkonen said. “Does the buzz build and say, ‘Hey, you’ve got to go see this because of the 3-D.’”

Growth Rate

Studios plan to release about 34 movies in 3-D this year and 38 next year. Pyykkonen estimates that as many as 44 will be distributed in 2013, and said he expects quality to improve.

“If you think of this in the longer term, this is going to work and it’s going to be taken for granted,” Pyykkonen said. “The growth rate may be slower.”

One other element in 3-D’s favor is that the format is popular outside the U.S. and Canada. Foreign sales account for about two-thirds of the global box office for many of Hollywood’s big-budget films, and more than 75 percent for some, including “Pirates.” The global box office reached $31.8 billion in 2010, an 8.2 percent increase, according to the Motion Picture Association of America.

“Internationally, the percentages are way higher” for 3-D ticket sales, said Michael Lewis, chief executive officer of RealD. “The industry is spending a lot of energy figuring out how to maximize the potential of 3-D. This is still a relatively new medium.”

To contact the reporters on this story: Michael White in Los Angeles at mwhite8@bloomberg.net; Ryan Flinn in San Francisco at rflinn@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net; Tom Giles at tgiles5@bloomberg.net

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