Hollywood loves to boast about setting box office "records," but with the summer popcorn movie season getting underway this weekend, movie studios may have to rely on a new tactic — skyrocketing 3-D ticket prices — to make big claims this year.
Domestic box-office revenue from January through April was up an impressive 9% from 2009 to $3.4 billion, but the number of people who went to the movies was virtually flat compared with a year ago. The reason for the gap: surcharges of more than $3 on 3-D movies like "Avatar" and "Alice in Wonderland," which are driving up ticket prices in many Los Angeles theaters to more than $15.
Pull those surcharges out of the calculation, recent research by Lazard Capital Markets showed, and this year's box office increase would evaporate.
"You're getting a very big lift at the box office from 3-D and you'll really see it in the summer movie season too, but after that you have to assume you're going to see much less of a lift," said Barton Crockett, an analyst at Lazard.
Ticket prices are very much on the minds of Hollywood executives this weekend. Friday's " Iron Man 2" (expected to earn around $150 million in its first three days of release) marked the start of the industry's most critical time of the year: summer movie season, when the studios generate 40% of their theatrical revenue from a slew of big-budget productions.
This year's summer is more important than ever because plummeting DVD revenue means box office is playing a bigger part in the equation for studios trying to earn a profit on films that frequently cost more than $200 million to produce and market.
The big question is whether the upcoming summer movie slate will generate real growth or if Hollywood is just riding a bubble of rising ticket prices that will pop by the end of 2010 when 3-D will no longer be a novelty to most filmgoers.
Rob Friedman, chief executive of Summit Entertainment, the studio behind the "Twilight" franchise, said that the current trend of audiences flocking to one 3-D movie after another can't last. "They will start selecting on content," he said. "That's the thing that always drives movie-going." Asked if the next "Twilight" sequel will be shot in 3-D, however, Friedman demurred. "Everything is possible," he replied.
For the moment, a boost in revenue from 3-D surcharges is one of the few sure things about an uncertain summer for Hollywood.
Despite the industry's obsession with exploiting recognizable brands, only five films coming out before Labor Day are sequels or spinoffs to recent hits, compared with seven last year. After "Iron Man 2," "Shrek Forever After," "Toy Story 3," " Sex and the City 2" and "The Twilight Saga: Eclipse," the prospects for other summer pictures are far from certain.
"This summer you have more movies with a chance to be surprise runaway hits, but you don't have the same number of absolute guaranteed hits as in previous summers," said Vinny Bruzzese, president of the motion picture division for OTX, which surveys moviegoers for the studios.
Among the rest of the season's films are several pricey pictures not based on earlier big-screen hits, including a new version of " Robin Hood" starring Russell Crowe, the video game adaptation "Prince of Persia: The Sands of Time," the brainy Leonardo DiCaprio thriller "Inception" and the Tom Cruise- Cameron Diaz vehicle "Knight and Day."
The industry will also be hoping that at least one summer comedy, perhaps Jonah Hill's "Get Him to the Greek" or Steve Carrell and Paul Rudd's "Dinner for Schmucks," turns into a "Hangover"-caliber sleeper hit.
In 2009, box office revenue surged past $10 billion for the first time and attendance hit its highest level since 2004 as recession-battered consumers turned to films as a relatively inexpensive form of entertainment.
This summer six 3-D movies will be released in theaters, twice as many as in 2009. Two of those, the "Shrek" and "Toy Story" sequels, are widely expected to be among the most successful of the season.
After those films come out in May and June, however, the industry will be testing whether there can be too much of a good thing. In a period of six weeks starting in early July, four 3-D films will be released on top of each other, including the animated film "Despicable Me" and the teen dance sequel "Step Up 3-D."
"Our customers have really decided that 3-D is a better experience and are willing to pay for it," said Tom Stephenson, chief executive of theater chain Rave Motion Pictures. "But one of the reasons you pay more to eat at a great steakhouse rather than McDonald's is because the food is better. We have to be very careful not to kill the golden goose."
So far there's no sign that audiences are being discriminating. The four 3-D films that have played in 2010 — "Avatar," Alice," "How to Train Your Dragon" and "Clash of the Titans" — have been the four highest-grossing movies of the year. In the case of "Clash," there has been little evidence that audiences share critics' negative opinion of the quality of the movie's last-minute 3-D conversion.
Nonetheless, some of the people behind this summer's 3-D movies said they're aware they have to deliver an experience that's worth a higher ticket price.
John Chu, the director of "Step Up 3-D," says many of the film's teenage fans will need to work "an extra hour" in their jobs to afford the higher-3-D ticket prices. "So we have to make it that much more exciting," Chu said, adding that 3-D "fits perfectly" for a movie about dancing.
Chris Meledandri, a producer of "Despicable Me," said that he believes the 3-D effects in his film about a trio of orphans trying to stop a villain from stealing the moon are critical to drawing in audiences emotionally. "The responsibility is on our shoulders to create movies that audiences consider worthy of paying the surcharge," Meledandri said.
If audiences do embrace 3-D as passionately this summer as they did in the first four months of 2010, movie studios and theaters may not even care if attendance fails to increase. Some believe they can just keep on raising prices.
The average surcharge now, including on large-format Imax screens, is between $3 and $3.50. But on a recent conference call with analysts, DreamWorks Animation CEO Jeffrey Katzenberg, an early proponent of 3-D, said that the short-term ceiling may be as high as $5.
"Those prices have continued to go up," he said, "and we think that will continue."
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