3D cinema in the US is positioned for a shakeup. Only in the US do studios pay for the polarized glasses used in cinemas for systems such as RealD and MasterImage. Not surprisingly, they have managed to limit their generosity to the polarized variety, leaving exhibitors having 3D products from companies such as Dolby and Xpand on their own.
The root of this generosity was RealD. In the early days of cinema, exhibitors weren’t sure about the longevity of 3D movies, and bought into RealD’s licensing model, where a fee is paid by the exhibitor on a per-ticket basis. The attractive features of the model are that studios supply the glasses for free. A decision first made by Disney, followed in suit by the other studios, and later regretted by each. In all other countries, exhibitors pay for glasses.
But the studio-supplied glasses model has been persistent in the US. RealD, with big plans to go public, needed to demonstrate recurring revenue. It did this by locking exhibitors into the per-ticket licensing plan, forcing a 5-year or longer term. US exhibitors, in turn, perform a rain dance on Hollywood whenever a studio proclaims that they’ll no longer pay for glasses. For the exhibitor, the cost of the RealD per-ticket-fee plus glasses is far more than they bargained for.
But the cost of alternative systems have come down. Multiple polarization-based 3D systems are now available, with MasterImage leading the group. Unlike RealD systems, which are leased on a pay-per-ticket basis, these systems are purchased outright, providing substantial savings to the exhibitor. But alternative systems pose no savings to the US distributors, who are stuck paying for polarized glasses. A studio could be accused of restraint of trade, a serious charge, if only paying for glasses sent to RealD licensees.
A milestone has been reached, however. When the first RealD licenses were signed, the average per-ticket-fee with RealD was less than the cost of glasses. At that time, the fees paid by exhibitors to RealD were less than that which the studios paid for glasses. Today, however, those costs have reversed, as glasses are now less expensive than the RealD license fees. If the exhibitor owned an alternative system and paid for its glasses, it would be paying less money than it would for a RealD lease.
It may seem that the studios should be glad to get away with paying less for glasses today, but the reality is that they don’t want to pay anything at all. In fact, the sum of the two new scenarios – new lower cost polarization systems, and cheaper glasses – gives even more fuel to the studios to stop paying for glasses. After all, the exhibitors now have alternative systems to choose from, and they don’t have to give up their silver screens. Eventually, a studio will announce that US exhibitors will join their brethren around the world and start paying for glasses.
RealD, of course, isn’t blind to the rising tide. To keep exhibitors on the hook with long term license agreements, the company strategically introduces technology enhancements that place it ahead of the competition. It’s “XL” light doubler technology was one such step. It’s expected that RealD will introduce a new patented silver screen flake at CinemaCon, through screen manufacturer MDI. The new flake will create a wider viewing angle with the typical high gain of silver screens. The process is said to be very expensive. It remains to be seen if RealD will simply give this screen to its licensees. But to do otherwise would not be consistent with its need to keep its licensees happy to nurture long-term revenue.
Even so, glasses are likely to be on the table again, possibly as soon as CinemaCon.