Few brands have ever been successful at instilling desire in cinema audiences. Over the course of the past 30 years, Dolby, IMAX, and THX lead the list. Dolby was the first to demonstrate the power that a cinema brand can lend to consumer products. The idea proved to be so good that the space is overflowing today with brands. Rising above the fray is now the hardest part of cinema branding today. When shown a slide of the many brands that now clutter the cinema space, exhibitors almost unanimously point to only one as having the power to attract customers: IMAX. Hoping that some of IMAX’s success can rub off on them, RealD announced its plan to license its new LUXE brand of large format cinema experience.
RealD’s plan is nearly identical to one that I presented to THX over a year ago, providing an opportunity to comment from research performed at that time. (The THX work was a last ditch effort by management no longer there to salvage its presence in cinema. THX now touts its intellectual property, with Apple its first target in court.) The concept, if executed well, can be quite attractive to small and medium-sized exhibitors. Particularly outside of the US, where THX was strongly embraced at its peak, exhibitors seek ways to differentiate and convey quality. THX did this by certifying cinemas, an approach that worked well when the quality difference between a THX and non-THX auditorium was easy for audiences to experience. Such differences are not so easy to ascertain today.
IMAX succeeds with a different approach of controlling all details of the auditorium, screen, and equipment. But audiences don’t understand the details. Rather, they understand that IMAX has had a long history of providing excellent large screen experiences. IMAX continues to strongly market its brand, and audiences feel they will experience the best movie performance in an IMAX auditorium. Arguments can be made that other auditoriums do things in a better way, but this comes back to the whether the audience will notice the difference. At the risk of oversimplifying, IMAX doesn’t have to technically be the very best. But it has to convince the audience that it is the best, and IMAX does that very well.
Accordingly, it would be difficult to remove IMAX from its top-of-hill position. But there’s always room down the hill. Each of the top ten cinema circuits in the US has engaged in promoting their own large screen brand. This is not with the intent of exclusivity, however, as most if not all of these circuits also embrace IMAX at specific locations. But these circuits provide excellent proof that a second-tier brand can work.
When it comes to creating a new brand that goes across multiple cinema chains, RealD is one of the few companies in cinema capable of execution. It has a name and the necessary resources that its market valuation brings. It has unique technology to boot. RealD has its new Precision White screen to tout, providing a clear visual differentiator to the audience. And it has the technology, where needed, to enable the exhibitor to meet a high brightness standard for 3D.
But these aren’t reasons for entering the branded experience space. RealD has a few problems of its own that this move will address. Its per-ticket fee isn’t popular outside of the US, and building its brand in these regions is an important step to opening doors for growth. Just as problematic, Wall Street is disappointed that RealD has not been able to deliver on its promise to profit in the consumer market. ESPN’s recent exit from 3D sports programming in the US only reduces those chances. The company needs to convince the market that it has a plan for growth, and LUXE appears to be the path that RealD has chosen.
Wall Street, however, does not appear to be impressed. RealD’s stock dropped 7% on its announcement of LUXE, and stayed there. To investors, the backstory is that RealD failed to achieve its ambitions in the consumer market, and is changing course to compete head-on with IMAX. Instead of becoming a market leader in consumer 3D, it is now moving to become a second-tier brand in cinema experience. It’s a very different risk to what investors were originally sold, and it appears that they’re not buying it, at least for now.
