With so many entertainment forms available for consumers to choose from, movie theater operators have good reason to worry about the future. At least one research shop says industry ticket sales and revenues were down in 2010. Many theater operators and production companies hope that the 3D segment will be an exciting enough alternative to get consumers to pay extra to see movies in this format. But research indicates that the ticket premium being charged for 3D may put off consumers.
According to The-Numbers, an estimated 1.32 billion theater tickets were sold in the U.S. generating $10.37 billion last year. Of that, about 15% of total revenue comes from the ticket sales to 3D movies. Industry analysts predict that the format could generate between 20–30% of movies theater revenues this year.
And who can blame theater owners for rushing to upgrade to 3D technology. Gabelli & Co analyst Brett Harriss says that theater owners can realize 30% margins on 3D tickets compared to 20% margins on 2D films. And film producers are finding sufficient funding to make these movies. In some cases, producers are converting films intended for 2D into the 3D format to increase profits.
All of this excitement may be much ado about nothing in the long run. Theater owners often charge a $5 ticket premium for the 3D format. But a poll from BTIG Research indicates that a large majority, 77%, of U.S. consumers do not want to pay a premium of more than $4. PriceWaterhouseCoopers (PWC), which has also weighed in on this topic, warns that a significant percentage of the population is not willing to pay any premium at all for 3D. PWC analysts also suggest that the 3D phenomenon may be short lived. Certainly, the slow sales of this year’s new 3D TVs have shown that there is a limit to what consumers will pay for entertainment.[Source: U.S. Movie Market summary 1995–2010. The Numbers.com; Phadke, Manasi. U.S. theater owners see new dimension in margins from 3D. Reuters.com. 22 Jul. 2010. Web. 12 Jan. 2011; alexander, Bryan. Study: Overpriced tickets could Kill Hollywood’s 3D Box Office. Hollywoodreporter.com. 10 Jan. 2011]