Market Analysis - Live 3D could provide a game changer for delivery of alternative content to cinemas and driving 3D to the home but the current lack of a viable business model for the long term future of live 3D undermines both prospects. Charlotte Jones, senior cinema analyst, Screen Digest takes stock.
Alternative content is fast becoming a significant component of cinema exhibitors’ programming, generating higher revenues from otherwise underperforming timeslots as well as diversifying the traditional demographic mix of cinema audiences. The combination of higher seat occupancy, over and above the film screening that is being replaced, and the mark-up for higher ticket pricing, especially for live events, are key drivers of this developing sector, and are behind the evolving attitude of cinema owners towards non-theatrical programming.
As a sector in its own right, alternative content is forging a small but significant revenue stream, worth a predicted $526m globally by 2014, from a level of $45.7m in 2008 that is equivalent to just 0.5% of gross box office. The conversion of all 110,000 global modern screens to digital projection technology took a major leap forward in 2009, with 16,300 screens now equipped (or 15% of the total market) and approximately double the screen estate of a year before. The speed of the digital acceleration can be attributed directly to 3D with 85% of new digital locations upgrading purely for the incremental benefit of 3D, accounting for over 53% of all installed digital screens around the world.
Alongside the evolution of the digital screen base, a sustained stream of attractive and premium content will be instrumental to this evolving sector as cinemas move to position themselves as a general entertainment or cultural centre. In this early phase of digitisation, the most popular presentations (in 2D) have been live opera, theatre and music concerts, which accounted for over 85% of the UK alternative content market alone, one of the more advanced digital cinema markets with 18% of screens already converted to digital and over 80% predicted by 2013. In contrast, traditional sports broadcasts, such as Formula One, have often met with a mixed reaction, mostly because cinemas have yet to provide the unique selling point over and above the terrestrial broadcast transmission.
Live 3D to cinema
Live 3D could provide that game changer for cinemas, bringing the audience closer to the action and raising the bar against other media and offering that elusive selling point that cinemas will need, particularly for sport. 3D will facilitate the development of the alternative content market by enhancing the range and attractiveness of programming.
The 3D digital cinema base, which more than tripled to over 8,800 screens in 2009, will continue to act as both a test bed for the current trial and development phase of live 3D and also the ideal platform to build momentum for the eventual 3D market in homes. Ultimately, revenues from non-theatrical programming in cinemas could exceed $1bn globally, with 3D poised to deliver a significant boost as it permeates an ever wider range of programming.
Live 3D in cinemas is being driven almost exclusively by broadcaster trials in this field, with activity especially concentrated in Europe and North America. Cinemas are benefitting from this testing period as they are effectively the only major commercial outlet for 3D. Live 3D in cinemas represents the pinnacle of the consumer experience, adding an extra premium on content, typically three times the value of a regular cinema ticket, and a key differentiator to attract audiences.
Broadcasters drive the market
For broadcasters, live 3D is the next logical step for immersive high definition entertainment, providing premium content and building a competitive advantage. European satellite providers BSkyB and Eutelsat currently lead the way through the preparation of content for upcoming 3D TV channels. BSkyB is perhaps the most aggressive with the prospective launch of its service later this year. Eutelsat has also been trialling its dedicated 3D channel for more than a year, as well as distributing select events into cinemas on a limited scale, ranging from European basketball to music concerts. French telecoms group Orange has tested the live capture of tennis matches from Roland Garros in 3D for the last two consecutive years and delivered the live final in stereoscopic 3D to cinemas in France and Spain.
Away from sport, AEG Live, one of the world's largest event companies, intends to collect performances from as many as 100 artists in 3D during 2010, with the underlying aim of replicating a concert experience for theatrical release, highlighting the potential that 3D alternative content in cinemas offers. Even within this wider context key sporting events will act as major milestones in driving the live 3D market forward and creating a new standard against which future events will be benchmarked.
While Rugby’s Six Nations event broadcast live last month to 40 UK cinemas was one of the most high profile to accommodate 3D thus far, the 2010 FIFA World Cup in South Africa will be the first major global sporting event to be recognised as a vehicle for the potential of live 3D. As a result of this and an increasingly bullish industry outlook on 3D, Screen Digest increased its forecast, and now estimates that 13.6m 3D TV sets will be installed in Europe by 2013.
In search of a business model
However, even this event will be mostly utilised in a promotional context, and underlines the current lack of a viable business model for the long-term future of live 3D into cinemas and other media. One of the biggest challenges ahead is the production value and maintaining the quality benchmark that has been established first and foremost by the Hollywood studios and which helped to generate over $1bn at the US box office (or 12% of total revenues) purely from 3D in 2009. Content rights are another issue of contention, of which the 3D component would not have been previously incorporated into rights values, adding another layer of complexity.
Since consumers have shown they are willing to pay a premium for 3D content in cinemas, enabling 3D in the home should prove an attractive proposition for content producers across the entire value chain. 3D is not a new pipeline, simply an enhanced presentation from capturing and simultaneously delivering the second eye perspective, to existing pipelines, albeit often with additional bandwidth demands. As a result, all sectors from game developers to film and TV producers and sports broadcasters are looking to capitalise on this and gain the essential early mover advantage in each respective sector.