3-D is helping brighten the picture for Imax

When director James Cameron wanted to give fans a glimpse of his 3-D epic “Avatar” last summer, he opted to show the first 15 minutes of the sci-fi film in big-screen Imax theaters in the U.S. and Canada.

“We thought it was the perfect way to introduce the movie to the public,” said “Avatar” producer Jon Landau, chief operating officer of Cameron’s production company, Lightstorm Entertainment. “We wanted ‘Avatar’ to be an immersive experience, and really, there’s nothing more immersive than the Imax screen.”

The thumbs-up from Hollywood’s self-proclaimed “king of the world” would prove to be a boon to Canadian company Imax Corp., which so far has generated more than $150 million in ticket sales for “Avatar,” the highest-grossing movie in history. It also underscores how the company’s fortunes have brightened since three years ago, when Imax struggled under massive debt, a tumbling stock price and doubts that it could survive the digital revolution.

Thanks to a financial restructuring, a shift in business strategy and an aggressive move into 3-D, Imax is expected to post its first annual profit in four years after recording a $33-million loss in 2008.

Once known as a showcase for earnest nature documentaries like “Everest” and “The Living Sea” that are shown in museums, Imax has become an increasingly prominent player among mainstream theater operators, doubling the size of its commercial circuit over the last two years to 327 locations in 44 countries. Now the company, which has about 80 employees in Santa Monica, plans to invest up to $25 million in opening 65 additional theaters this year.

“Imax was a place where I’d take my kids on Sunday if I wanted to see a movie about whales or the Antarctic,” said Brad Grey, chairman of Paramount Pictures, which yielded 8% of its domestic ticket sales for last summer’s “Transformers: Revenge of the Fallen” from Imax, even though it accounted for less than 2% of the screens. “It has become an almost essential part of releasing a blockbuster.”

Although most analysts think 3-D is here to stay, some question whether consumers will continue to pay more to see a 3-D movie in an Imax theater as less costly alternatives spread.

Imax faces competition not only from leading 3-D supplier RealD but also from one of the nation’s largest theater circuits, Cinemark, which has introduced its own large-screen digital projection system, sparking an ongoing court battle between the exhibitors. And some film fans have complained about Imax’s push toward smaller screens.

“I think consumers might start to see there are other 3-D options out there, that they can watch a 3-D movie for a cheaper price on a screen that is about the same as an Imax screen,” said analyst Eric Wold of Merriman Curhan Ford, who has a “sell” rating on Imax.

Imax executives say they aren’t fazed by competitors. “As ‘Avatar’ has shown, we are the venue of choice,” said Greg Foster, president of filmed entertainment.

The large-screen format holds special appeal for makers of action-packed movies. “There’s an event quality to going to an Imax film,” said actor and director Jon Favreau, whose upcoming movie “Iron Man 2” -- also a Paramount film -- will have an Imax release. “It creates a more intense experience for the audience.”

Wall Street likes the story: Imax’s stock price has jumped more than 150% in the last year. “The company is growing, profitable and positioned to leverage the rising popularity of 3-D and digital cinema in 2010 and beyond,” wrote Brigantine Advisors analyst Steven Frankel in a recent report.

Debuting at the 1967 World’s Fair in Montreal, Imax pioneered the display of films on screens as tall as eight stories, developing a proprietary projection and sound system intended to envelop the viewer.

The Ontario, Canada, company’s first Hollywood film was Universal Pictures’ “Apollo 13” in 1995, followed by Fox’s and George Lucas’ “Star Wars: Episode II Attack of the Clones” and other major movies.

Despite Foster’s successful efforts to forge closer relationships in Hollywood, many studios balked at the high cost of distributing Imax 70-millimeter prints, which run up to $50,000 each. Moreover, theaters were reluctant to spend the $1 million to $2 million needed to buy Imax technology.

The tide turned in 2008, however, when Imax developed a digital system that eliminated hefty film print costs. The system converts a traditional film into a digital format for $1.5 million to $2 million. Studios, which distribute the films, hand over about 12.5% of the ticket sales from the Imax release. Today, half of Imax’s theaters use digital projectors.

In another shift, Imax also has formed joint ventures with major exhibitors like AMC Entertainment Inc. and Regal Entertainment Group. Instead of putting up its own “purpose built” theaters, or insisting that exhibitors pay out of pocket for 3-D systems, Imax would supply the equipment for a slice of box office and concession revenue.

“We learned how to be good partners with exhibitors, studios and filmmakers,” Foster said.

Rapid growth ensued -- along with some embarrassing consumer complaints, notably from TV actor and blogger Aziz Ansari, who accused Imax last year of “duping” customers into spending an extra $5 to watch Paramount’s “Star Trek” on an AMC screen in Burbank that was not much bigger than a conventional screen.

In an open letter to “guests and fans” in September, Imax Chief Executive Rich Gelfond said the growth strategy “allowed us to show more films on more screens -- and in more locations” and disputed claims that the multiplex locations weren’t “real” Imax theaters. He cited a Nielsen Co. survey showing high customer satisfaction with newer- and older-design Imax theaters.

Nonetheless, Gelfond said, Imax would post information on its website and distribute fliers to moviegoers about the designs of theaters so customers “make sure they know what they are getting.”

richard.verrier@latimes .com