Of the four major suppliers of add-on 3-D technology for digital cinema, we report on three of them in this section. Dolby, the fourth, is reported in the Servers section.
3-D tickets are sold with a premium added, typically in the $2-$3 range. The premium is split between exhibitor and distributor in the same manner as a normal ticket. In the business model for 3-D, the exhibitor expects to break even given the cost of the add-on system and the additional revenue collected at the box office. Not always, however, is this the case.
MasterImage is Korean based, supplying a 3-D add-on set of optically polarized encoder and low-cost, passive polarized glasses. As with RealD, the polarization method requires use of a silver screen.
The company is slowly building its footprint in the US and Europe. Unlike RealD, its technology is purchased by the exhibitor, either through a financing arrangement with per-ticket payments, or outright. Also unlike RealD, the polarization filters used are purely optical, switched in front of the projectors lens via rotating wheel, and not electro-optical. The rotating filter assembly can be rolled to another projection system nearby, bring a degree of flexibility to a purchased asset. The mechanical rotation of filters also does not need “ghost reduction,” as required for RealD.
Successive generations of the product have led to substantial improvements in both operation and safety. While the core technology relies on polarization, the application of polarization filters is different from that of RealD, making the system’s glasses incompatible.
MasterImage is weak in terms of its own sales force, and to compensate is building a dealer network around the world. The company is experiencing demand for its product, but would benefit substantially from a highly visible marketing program and a stronger sales team.
RealD provides 3-D add-on technology for digital cinema projectors, and low-cost 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, called a Z-Screen™. When electrically stimulated, the panel changes polarity, such that a sequential display of left and right images can be uniquely polarized. In this manner, polarized glasses direct left images to the left eye, and right images to the right eye. Polarized images must be displayed on high gain silver screens.
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 the double images, caused by crosstalk. To date, RealD EQ, the name applied to its ghostbusting process, is performed pre-distribution, creating dual inventory content. (No other 3-D process requires ghostbusting.) To eliminate the dual inventory problem, it is now licensing RealD EQ technology to server companies for inclusion in their products. However, no industry date has yet been socialized for switching away from dual inventory distribution.
RealD has established itself as the most popular provider of 3-D add-on technology. It has installed its technology in approximately 2000 screens around the world. It’s EX system is unique in its ability to provide the light necessary to support large screens. 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 ensured quality by engaging itself at every step of the capture and post production process when first entering the cinema sound market.
Exhibitors may not be infatuated with silver screens, but they love not having to pay for RealD’s polarized glasses. The glasses cost approximately $0.75 each, and are typically paid for and distributed to the theatre by the film distributor. The audience gets the glasses for free.
Distributors, however, are not happy to continue paying for glasses. Fox announced at ShoWest that it would not pay for glasses for Ice Age, although faced with threats of not showing the movie in 3-D, it appears to have given in somewhat on this position. RealD’s glasses can only be purchased through RealD, for whom the glasses have become a profit center. The company refuses to allow glasses supplied by others to be used with its system.
RealD’s penetration in the 3-D market has been exceptional, but is showing signs of slipping. Six months ago we reported that RealD has 80% of US 3-D screens, where today it has 60%. While its investors have sights set on the home market, the home 3-D market is elusive, and requires strong relationships with the consumer electronics companies that are not intrinsic to RealD’s cinema business.
RealD entered into an arrangement with Sony Electronics to supply the filters for Sony’s 3-D projection system. Sony’s technology will not support sequential projection. Instead, both left and right images are simultaneous displayed and projected by means of a dual lens assembly.
XpanD is a Slovenian company, providing 3-D shutter glasses to cinemas. Its glasses technology was acquired from Beaverton-based McNaughton Inc., also known as Nuvision. XpanD is owned by Sergej Racman, vice chairman of KD Group, a Slovenia-based holding company. Maria Costeira is CEO.
Shutter glasses deserve explanation. The technology takes advantage of the sequential nature of DLP 3-D projection. The glasses are battery-powered, employing LCD lenses that open for one eye at a time, allowing the left eye to see left images as they are sequentially displayed, and the right eye to see right images. They are triggered wirelessly by an infrared transmitter.
XpanD priced its glasses as high as $45, but says it will negotiate down. As with Dolby’s 3-D solution, glasses that are too expensive to give away require cleaning in between shows. Also similar to Dolby’s, XpanD’s glasses work with non-silver screens, which makes this method popular. Unlike Dolby’s method, XpanD’s system does not require modification of the projector.
XpanD’s has achieved fair penetration into the US market. The high cost of glasses, however, remains its largest impediment. Notably, in Europe, Volfoni is now renting XpanD glasses to theatres, which is proving popular.
The company recently hired Bob Pinkston to lead its US sales effort. Bobby was VP Engineering for UA Cinemas in the 90’s, and most recently leading cinema sales at Dolby.