3-D technology firm RealD has starring role at movie theaters
RealD founders Michael Lewis, left, and Joshua Greer worked to improve the quality of 3-D images.
The Beverly Hills company has become a huge player, with deals to install systems
in cinemas including those of AMC and Regal.
By Richard Verrier
March 26, 2009
As Hollywood rushes headlong into 3-D filmmaking, few companies have as much to gain --
or lose -- as RealD of Beverly Hills.
The privately owned technology company with 75 employees has emerged from obscurity to
become the leading provider of 3-D systems for movie theaters, outflanking established
players such as Dolby Laboratories Inc. RealD's products -- which include an adapter that
attaches to the lenses of digital projectors and lightweight glasses -- account for 90% of the
U.S. market.
Underscoring its dominance, RealD just signed an agreement with theater chain AMC
Entertainment Inc. to install its 3-D technology for as many as 1,500 screens. Terms
weren't disclosed. The deal, which will be formally announced today, follows similar
agreements with theater operators Cinemark USA Inc. and Regal Entertainment Group.
"We've been impressed with the system," said Frank Rash, AMC's senior vice president of
strategic development and marketing. "People are very comfortable with the experience."
The contracts come as theater operators seek to lure people away from the big screen highdefinition
TV at home and back into theater seats.
Hollywood studios, concerned about younger audiences who increasingly are turning their
attention to video games, the Internet and text messaging rather than going to movies at
the mall multiplex, also are banking on the new format.
Over the next three years, about 40 films are scheduled to appear in 3-D, including James
Cameron's long-awaited sci-fi adventure "Avatar," which Fox will release in December. Walt
Disney Studios has 17 3-D movies in the pipeline. And DreamWorks Animation SKG is
releasing all of its new features in 3-D, starting with Friday's opening of "Monsters vs.
Aliens," whose performance will be closely watched as a bellwether for the new format.
The studios have been encouraged by the 3-D versions of movies such as "Coraline" and
"My Bloody Valentine." And if the upcoming releases live up to the hype, that could be a
boon to RealD, which makes money by licensing its system to theaters, which typically pay
an upfront fee of $5,000 to $10,000 and a royalty of about 50 cents per ticket.
Nonetheless, the company's $100-million investment in 3-D technology is a gamble. The
credit crunch has slowed the conversion of theaters to digital projection systems, which are
required for 3-D screenings. Currently, only about 2,000 of 40,000 screens in North America
are 3-D ready.
And although domestic box-office attendance is up about 6% this year despite a severe
recession, some analysts question whether penny-pinching moviegoers will be willing to
shell out the extra $3 to $5 per ticket to watch a movie in 3-D.
"Is the value proposition sufficient that consumers are going to feel like it's warranted?" said
Michael Pachter, a media analyst at Wedbush Morgan Securities. "My guess is no."
For years, theater owners and studios squared off over which would pay for the switch to
digital projectors, which cost about $70,000 per screen.
That dispute was resolved last fall, when a consortium of exhibitors and studios agreed on a
plan to finance the conversion of nearly 20,000 theater screens and enlisted JPMorgan
Chase & Co. to help with the financing. Then the credit markets froze, making it hard to
bankroll the conversions.
"It's clearly slowed the rollout," said Regal Chief Executive Mike Campbell, whose company
has RealD's systems on only 240 of 6,800 screens. "We would love to have more 3-D
screens on the market, but it's beyond our control."
Campbell sees the financing problem as temporary, as does DreamWorks Chief Executive
Jeffrey Katzenberg, a zealous advocate of 3-D.
Katzenberg has had to temper his expectations. He initially predicted that "Monsters vs.
Aliens," which cost about $175 million to produce, would open on 5,000 3-D screens.
Instead, the film will open on less than half that number.
The slower pace of the 3-D rollout hasn't stalled RealD's business, Chief Executive Michael
Lewis said.
RealD won't disclose its finances, but Lewis said revenue nearly doubled in 2008 and that
the company was on track this year to post an operating profit. "The best creative minds
are using this as a new type of filmmaking," Lewis said. "This is a fundamental shift."
Veni, Vidi, Vici 
