3-D Theater Revenues Decline, Though Root Cause Remains Uncetain

The consumer love affair with 3-D technology has waxed hot and cold for the last century, and current data indicates that's not going to change. A surge in 3-D movie ticket sales several years ago jump-started the film and display industries' most recent attempt to push the technology  but consumers simply aren't biting.

A recent report from Slate catalogs a fresh year of data as a follow-up to an August, 2010 piece on slumping 3-D ticket sales. 12 months later, things have only gotten worse. A few years ago, theatre owners who invested in 3-D screens were realizing a substantial return on their investments thanks to significantly higher revenues on a per-screen basis. Now, those gains have turned negative, with 3-D screens actually returning less revenue overall in 2011 than their 2D counterparts.

Graph reprinted from Slate

A number of factors have contributed to the current situation. Once theatres realized people were willing to pay a premium to watch 3-D content, they responded by raising ticket prices ~10 percent over and above the $2-$3 premium
that 3-D tickets already commanded. This accounts for part of the steepness of the decline over the past 12 months, but not the general trend. The quality of the 3-D conversion may have played a part, but this is less certain--films with high-quality, well-received 3-D conversions have also suffered from lousy sales.

A larger problem appears to be that the quality of 3-D films is, on average, lower than the quality of 2-D movies. This is perhaps the most dangerous explanation--if true, it implies that consumers may have begun to link "3-D" and "lower-quality", even if the link isn't concious. From 2004-2010, the average Rotten Tomato rating of a 3-D film was 57 percent. From 2010-2011, it's dropped to 41 percent.  That includes the impact of all the extremely well-rated films also released on 3-D.

Lower-quality films would explain a general trend away from 3-D viewing--but fails to explain why specific, highly successful films like the latest Harry Potter, with great 3-D versions, have still failed to even match 2D earnings. The complexity of the problem suggests that 3-D may never escape the cycle of valuable novelty / financial liability.

Unlike surround sound or color broadcasting, up to 10 percent of people have vision problems that make it difficult or impossible for them to see 3-D in the first place. A significant percentage of the rest suffer from nausea and motion sickness. The rest don't respond to 3-D content--even top-tier, high-quality content--in a consistent manner. Why did Tron: Legacy's 3-D sell well, while Harry Potter's 3-D take was abysmal?

Without an answer to the question and the assurance that consumers are going to gobble up 3-D and pay corresponding premiums, there's precious little reason for movie and television studios to pay good money to create 3-D content. Gaming is an unlikely savior, despite the efforts both Nvidia and ATI have made to support it on. The revolution isn't happening.