RealD provides 3-D add-on technology for digital cinema projectors, and polarized glasses for viewing. It is a privately held startup, funded by venture capital. Investment houses such as Shamrock, chaired by Roy Disney, and other capital sources provide the company with its funding.
The company’s primary product in the cinema space is an LCD-panel that polarizes light passing through it. When electrically stimulated, the panel changes polarity, such that a sequential display of images can be uniquely polarized. In this manner, left eye images are polarized one way, and right eye images another. Polarized images must be displayed on high gain, silver screens, and viewed with low cost polarized glasses. To compensate for optical crosstalk between left and right images, RealD has IP in a process called “ghostbusting,” where content is processed to eliminate ghosting, or double images, caused by crosstalk. To date, RealD requires its ghostbusting process to be performed pre-distribution. Distribution companies do not like this, as it requires dual inventory. (Ghostbusted content is distributed only for RealD screens, and non-ghostbusted content for all others.) To eliminate this problem, it is now working with server companies such as Doremi to implement ghostbusting filters at the time of playout.
The company does not sell its technology, but instead licenses it. Licensing arrangements vary, from a flat annual fee, to a fee per ticket, to arrangements that combine both flat and per-ticket fees. The collection of licensing fees rests, of course, on the availability of content. RealD leaves little to chance, and has strategically involved itself at the producer and director level to insure that quality 3-D movies are produced and distributed to licensees. In this, RealD has taken a tip from Dolby’s past, who also strategically engaged itself at every step of the capture and post production process when first entering the cinema sound market, ensuring that quality sound tracks were produced and played on its systems.
RealD polarized glasses cost around $0.75 each, and are typically paid for and distributed to the theatre by the film distributor. They are given away to the patron. Due to the need to pay for the glasses, and due to its flexible licensing arrangement which could require it to participate in box office revenues, RealD requires that 3-D tickets are sold at a premium. The premium is split between exhibitor and distributor in the same manner as a normal ticket.
RealD’s penetration in the US 3-D market has been exceptional. It licenses systems to at least 80% of US 3-D screens today. But its sights are set for the home market, where its investors hope to profit. The company, smartly, does not tip its hat about its consumer plans, so as not to upset its exhibition customers. But one can’t help but notice the number of consumer sets that decorate the walls of RealD’s conference room.
The company owns the Crystal Eyes line of LCD shutter glasses for 3-D visualization, as well as ColorLink, experts in developing coatings and films that provide the filters for the 3-D effect.
In observing industry activities for 3-D in-the-home, it has attracted every consumer electronics company around, including names in this report such as Dolby, DTS, and RealD. The first challenge to success in the consumer space is brand recognition. RealD has played this out well, with over 80% penetration in US theatres. The 2nd challenge will be the introduction of compelling consumer technology that warrants a license. RealD’s acquisition of ColorLink may prove valuable for this purpose. Time will tell.