Dreamworks 3-D riding out economic crisis

By HIAWATHA BRAY, Boston Globe
First published in print: Thursday, December 18, 2008

One of Hollywood’s top producers said the ongoing financial crisis is hampering his efforts to release digital 3-D movies.

Jeffrey Katzenberg, chairman of DreamWorks Animation SKG Inc., said all future movies from his studios will be made in digital 3-D. But today only about 1,500 of the 36,000 theater screens in America are capable of showing such films,

“Until the financial markets come unstuck, which is probably late in the first quarter, the next round of the digital rollout is on a very slow pathway,” Katzenberg said during a visit to Boston earlier this week to show off clips from his studio’s upcoming film, “Monsters vs. Aliens.”

It costs about $70,000 to convert a single movie screen to the digital projection system for the 3-D films. But many theater owners can’t afford to make the switch. Theaters are finding it tough to borrow the money, as banks tighten their lending practices after years of ill-advised loans.

Katzenberg said about 2,500 screens should be converted to digital 3-D by March, in time for the release of “Monsters vs. Aliens.” Katzenberg thinks credit markets will have loosened up by May 2010, when DreamWorks Animation releases the fourth in its series of Shrek movies. He expects there will be 7,500 theaters capable of showing the film in digital 3-D.

Katzenberg noted the percentage of Americans going to movies has steadily declined for decades. Last year, the industry sold 1.4 billion movie tickets, 38 million fewer than in 1998, even though the US population grew about 30 million during the period. Katzenberg called digital 3-D cinema “the greatest opportunity of my time to reverse this,” and compared it to the introduction of soundtracks to movies in the 1920s and color films in the 1930s.

Today’s 3-D animated movies are made using two-dimensional technology, and the footage is then converted into a 3-D version. DreamWorks Animation is doing it the other way around; all its movies will be made in 3-D, with 2-D versions produced for home video sales and for theaters that lack 3-D projectors.

It already costs around $150 million to produce a full-length computer-animated film. Katzenberg said making such a movie in 3-D adds about $15 million. But theaters charge extra for the 3-D experience — generally $5 per ticket.

“It suddenly changes the economics of the movie business,” said Katzenberg. Theater owners and movie studios each get more revenue. Because the movies are digital, distribution costs are much lower. Instead of being delivered as a set of heavy film cans, each movie comes on a single lightweight hard drive. Eventually, the movies will be downloaded to theaters over a digital data network, eliminating all shipping costs. Digital delivery may help reduce the threat of theft and piracy. And 3-D makes it almost impossible to make illicit copies of a movie by aiming a video camera at the screen during a performance. The camera can’t capture the 3-D effect, and the resulting video is a murky mess. “This is the silver lining inside the golden opportunity,” Katzenberg said.
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