The Economics of 3D Movies

by Henry on September 21, 2009

Cory Doctorow in the Guardian:

Somewhere in the past year or so, it seems as though every studio exec has decided to greenlight one or more blockbuster in 3D, using a pretty impressive technology that employs polarised glasses to give a reasonably convincing illusion of depth. … And the 3D is … nice. … But I’m sceptical. … Up is a tremendous movie; it made me laugh and cry, and was intended to be seen in 3D … Nothing was obviously missing from the 2D experience that made me feel like the 3D was a must-have.
And of course, that’s true of all 3D movies. Movies, after all, rely on the aftermarket of satellite, broadcast and cable licenses, of home DVD releases and releases to airline entertainment systems and hotel room video-on-demand services – none of which are in 3D. If the movie couldn’t be properly enjoyed in boring old 2D, the economics of filmmaking would collapse … he economics just don’t support it: a truly 3D movie would be one where the 3D was so integral to the storytelling and the visuals and the experience that seeing it in 2D would be like seeing a giant-robots-throwing-buildings-at-each-other blockbuster as a flipbook while a hyperactive eight-year-old supplied the sound effects by shouting “BANG!” and “CRASH!” in your ear. Such a film would be expensive to produce and market and could never hope to recoup.

I haven’t seen a 3D film yet (I have been in a movie theatre precisely three times in the last four years – the result of two small children and limited babysitting options), so I have nothing to say about the aesthetic merits or demerits thereof. But if there is a significant constituency who (unlike Cory) prefer 3D movies, then there is probably a decent economic case for these movies, especially when (as with Up!), the 3D effects require only relatively cheap re-rendering. This case would rely on substitution effects. The problem with the movie home viewing market is that there is a substitute that is relatively good, and cheap-to-free – pirated movies via your BitTorrent service of choice. While I’m not going to get into the econometrics of whether or not the decline in DVD sales is a product of substitution or something else (the causal relationships are murky), I do imagine that if I were a movie entrepreneur, I would be thinking very, very seriously about ways to differentiate my product and move into a more secure market where individuals were less likely to be able to upload free competitors to my product and hence cut my margin to ribbons. Adding 3D effects (if there is a real demand for them) is one such means of differentiation.

And while we’re speaking of pirated intellectual content – I should make it clear that my argument here is a slightly updated version of one that Tyler Cowen made a few years ago in his book Good and Plenty. To quote from my contemporaneous review of same:

Perhaps the most interesting part of the book is one that goes on a tangent from Cowen’s main argument – his discussion of how changes in the ability of producers to enforce copyright are likely to affect cultural production. Here, he argues that the likely consequences will differ dramatically from art form to art form. Simplifying a little, he adapts Walter Benjamin to argue that there is likely to be a big difference between art forms that rely heavily on their “aura,” and art forms that can be transformed into information without losing much of their cultural content. The former are likely to continue to do well – they aren’t fundamentally challenged by the Internet. In contrast, forms of art which can be translated into information without losing much of their content are likely to see substantial changes, thanks to competition from file sharing services. Over time, we may see “the symbolic and informational” functions of art [becoming] increasingly separate,” as the Internet offers pure information, and other outlets invest more heavily in providing an “aura” and accompanying benefits of status that will make consumers more willing to pay for art (because it is being produced in a prestigious concert hall, exhibited in a museum etc). Pop music is likely to emphasize live concert performance more, because this has value that can’t be reproduced easily through electronic means (you have to ‘be there’ to properly enjoy it). Cinema is likely to emphasize the benefits of the movie theater experience, rather than enhancements to DVDs that can easily be ripped off by pirates. It’s likely to remain economically healthy even if profits are hit by illegal filesharing (most people didn’t bother to copy video cassettes because it was cheap to rent them).

In this contemporary argument, ‘flashy 3D special effects’ are doing the work of ‘Benjaminian aura’ – while the two are obviously rather different, their economic effects are quite similar to each other.

{ 36 comments }

1

Stuart 09.21.09 at 3:02 pm

I thought the main solution to piracy being persued was embedding the adverts in the programme/movie. Yesterday I switched over to ITV and thought there was an extended advert for Sony on, only later did I realise they had been showing Casino Royale.

2

Tom West 09.21.09 at 3:28 pm

I have to agree with Mr. Cowan. Doesn’t look good for any of the arts that are digitizable and work by individually touching their audience. My guess is that the books are in big trouble unless their audience is moral enough not to pirate what they love. Though it certainly didn’t work for music…

3

novakant 09.21.09 at 4:54 pm

There will be a small slice of the market for 3d, but it’s not going to make much of a dent. All the money spent on 3D – it’s definitely not cheap – could be used for much more interesting purposes.

I’m with Kristin Thompson et al on this.

4

novakant 09.21.09 at 4:54 pm

5

Keith 09.21.09 at 6:39 pm

I’d go to a theater more often if the soundtrack were played live, or if the food wasn’t so fraking awful, but not so much for 3D (which I can’t see because of my astigmatism) or for the privilege of paying $6 for a bucket of popcorn, so I can watch teenagers text each other during the movie. If the theater-going experience were scaled up a bit, making it more like going to the theater to see a play or opera, then I could see that as a cultural benefit. But that would exclusivize the whole industry, which wouldn’t be good for the economics. As I understand it, theaters already have a hard enough time getting buts in seats, possibly due to the aforementioned cost of popcorn, or because we’re also treated like criminal suspects, lectured at our apparent intent to pirate the movie we’ve already paid money to see.

6

Chris 09.21.09 at 7:25 pm

The inability to pirate 3D is only temporary — it works fine as information, and if there were real demand for it, there would also be real demand for a 3D-capable output device for computers, video games that rendered 3D in realtime (which actually would be only twice as much processing as their current 3D models -> 2D screen rendering, or possibly even less), then 3D-capable computer video, DVD and streaming web video and then it’s just as easy to pirate as 2D.

There’s not much market penetration in 3D output devices because hardly anyone cares, but that also sums up the market for 3D effects in theaters.

If people really wanted to watch things in 3D, we’d have had 3D TV decades ago. The technology isn’t hard.

7

tps12 09.21.09 at 8:31 pm

I’m skeptical of this newfangled “technicolor” thing. Sure, there are some great color films out there, but I haven’t seen one of them that isn’t pretty much just as enjoyable when viewed on a good old black-and-white television set. A truly color movie would look a lot like a colorblindness test, but I won’t hold my breath.

8

JM 09.21.09 at 9:26 pm

If the movie couldn’t be properly enjoyed in boring old 2D, the economics of filmmaking would collapse

The chatter I hear (e.g.) is that movies have to find something they can offer that their competitors can’t. Theaters have 3-D. TV, so far, has nothing and may be doomed as we know it.

9

noen 09.21.09 at 11:06 pm

I have to agree with Henry here, if I understand correctly, that 3-D movies may be able to survive on their “aura”. But if so then they’ll need to provide a bit more than the warm glow of “it’s 3-D!” You know, like having a plot and adult characters instead of appealing to 14 year old boys and children.

10

Tom West 09.21.09 at 11:52 pm

You know, like having a plot and adult characters instead of appealing to 14 year old boys and children.

Depends, are adults going to buy tickets to Transformers 17 times? In other words, are adults a market that has enough spare time and cash to make it worth anyone’s while to pursue? And do they buy enough low-cost high-price food?

Realistically, unless we are willing to shell out the same amount of money for a movie as we are for a ballet or play, we’re probably not a market that’s worth a whole heck of a lot. As long as 3-D is putting young bums on the seats, then it’s doing its job.

As well, we adults are probably not pirating films in droves (I hope, anyway), so 3-D is not necessary to keep us in the theatres anyway.

11

Kenny Easwaran 09.22.09 at 2:07 am

I’ve seen a few movies in 3d, but not Up. However, it did look to me like it had the potential to make much more interesting use of 3d than the ones I did see (Beowulf and Sea Monsters 3-D) made. Although perhaps Beowulf was a test to see how much of a difference 3d made in consumer preferences for images of a basically naked CG version of Angelina Jolie.

12

gmoke 09.22.09 at 3:58 am

Electronics companies are working on 3-D TV as we speak.

13

Zamfir 09.22.09 at 7:57 am

Making 3D computer screens is apparently not immensely difficult. And as Chris already notes, computer games offer a public willing to pay for for 3D that might be much larger than the public willing to pay for 3D movies.

There was the same phenomenon with HDTV, where tv manufacturers and TV suppliers where locked in a chicken and egg dance that was broken by video games.

So I wouldn’t be surprised if 3D came to homes before it makes it big in cinema.

14

Tom T. 09.22.09 at 11:03 am

You rarely see book publishers using 3D technology either. The internet would be less of a threat if pop-up technology was not confined to children’s books.

15

Hermenauta 09.22.09 at 3:07 pm

Gmoke got it.

Actually, there is at least one Philips 3D set so awfully engineered that you don´t need a special gogle to experience the effect.

16

flubber 09.22.09 at 6:13 pm

I would think vertigo or motion sickness would be an issue. But maybe that’s not as common a problem as I think…

17

Matt 09.22.09 at 6:27 pm

Realistically, unless we are willing to shell out the same amount of money for a movie as we are for a ballet or play, we’re probably not a market that’s worth a whole heck of a lot.

When I lived in NY City I bought $15 tickets to the Metropolitan Opera 3 or 4 times. The movies there cost $12 or so, and given that I usually buy a snack the price is close to the same. The Met tickets were not wonderful for sight, but not bad, and the sound was still very nice. (It would be better if the leg room wasn’t designed for someone about 5’6″ at most, but still.) Interestingly enough, the Met now offers HD showings of operas at various NYC movie theaters, but though I’d certainly be more comfortable at one, I don’t think I’m likely to go.

18

Lee 09.22.09 at 6:57 pm

I don’t know if 3D will have any impact on mainstream movies. But it would be huge in pornographic movies.

19

Ken 09.22.09 at 8:02 pm

flubber wrote: “I would think vertigo or motion sickness would be an issue. But maybe that’s not as common a problem as I think…”

No, it is a big problem. It’s not vertigo, but the mismatch between the muscles that focus your lens and the ones that move your eyes. Slate had a nice explanation of the problem, which is inherent to any 3D where the image is actually on a flat screen. That means all the current technologies, and pretty much anything else until holograms are working.

20

Chris 09.22.09 at 9:51 pm

3D movies are the only ones I will go out to see now. A 3D movie is a premium viewing experience. Why would I when I can rent a blu ray, have a beer and make popcorn at home $10 or less for my wife and I vs $40 at a theater?

21

polyorchnid octopunch 09.23.09 at 12:16 am

Speaking as a professional musician, this aura argument has a lot to recommend it. However, I have to admit it might be a case of hoping it’s true… playing’s more fun than recording anyway (at least from my point of view). Yeah, I’ll just tell myself that until I start to feel better. ;)

I’ve long been convinced that the future path for musicians is to use recordings distributed over the Internet for free to put butts in seats. That’s because a recording is cheaply reproduced, but the show isn’t. Of course, that means that it has to be a show, but since when is that a new idea in music? I never play a song exactly the same way twice anyway (at least, not when I’m playing it at a bar… when recording it’s a different story), so do things to make it interesting and unique, so that people who like the kind of thing that I do want to come to the show to experience that niqueness.

Oh, and push as much merch as you can. You might split the gate, but the t-shirts are all yours.

In the movie industry, I’d recommend that movie theatres consider going to IMAX across the board, and that Hollywood start making movies with that as the base format. That is an experience that cannot be easily replicated at home except by very wealthy people… and as pointed out earlier, it’s hard to pirate being in a movie theatre.

Another unique part of the movie experience is the communal nature of it, which is quite different from both television and the Internet. Making it easy for the audience to interact both before and after the movie (in a lounge, say) would both enhance the experience for the customer, making it more likely that they return, and give an opportunity to sell them things to the movie owner. Cinemas Guzzo in Montreal is an example of this kind of thinking, but it’s more ‘family’ oriented… think Chuck E. Cheese with a movie theatre. Bowling lanes, also. However, having a couple of rooms able to hold a couple of hundred people each, being able to sell them food (and decent food… it’s not like it’s impossible to make money selling decent food) and booze (adult lounge, youth lounge… that idea is as old as the hills in the bar business) and allowing people to talk about the movies they just saw will greatly enhance the audience’s appreciation of the experience as a whole… which can bring them back. Basically, build communities around the theatre by making it fun and interesting for people to see movies and meet the other people that see movies.

It would change movie making to an incredible degree (as I understand, making a 25 y.o. 16 with makeup is pretty much impossible when filming in IMAX; you see a 25 year old actor with a bad makeup job, not a 16 year old). I gotta ask, though, would that necessarily be a bad thing?

I think movie theatres will survive (and can even prosper), if they provide an experience that’s not replicable at home, and use the group nature of seeing movies in a theatre to their advantage by enhancing the overall communal experience as well as keeping ‘em around to extract more money from them.

Yeah, hooch… that’ll save ‘em.

22

Sage Ross 09.23.09 at 2:05 am

Tom West in comment #2:

Doesn’t look good for any of the arts that are digitizable and work by individually touching their audience.

Only if by “doesn’t look good” you mean “doesn’t look good for the content industries”. As a music fan, I say the death of the music industry can’t come soon enough. Photography, as an art, has never been richer and more diverse. Obviously, these are things that can be done well by individuals without much money. But movies and TV are getting closer to feasibility on a hobbyist (or hobbyist collective) budget. Should Hollywood pass away, we would not lack great medium- and long-form video art (if great in a different way) for long.

23

Keir 09.23.09 at 6:04 am

a truly 3D movie would be one where the 3D was so integral to the storytelling and the visuals and the experience that seeing it in 2D would be like seeing a giant-robots-throwing-buildings-at-each-other blockbuster as a flipbook while a hyperactive eight-year-old supplied the sound effects by shouting “BANG!” and “CRASH!” in your ear. Such a film would be expensive to produce and market and could never hope to recoup.

Who knew Cory Doctorow was such a Greenbergian formalist?

(Did you know that (a) colour is an important part of most paintings, and (b) you can make money selling black-and-white engravings of paintings, if you exist in the right time period?)

24

Jay 09.23.09 at 8:55 pm

A century ago, musicians could make a living with live performances. Recordings weren’t an issue yet. A musical career was very different. There were no “superstars” that everyone had heard hundreds of times. The market was much worse for the very best musicians, but much better for the majority of musicians. In a way, the advent of the internet can be seen as a return to trend for music. It’s the end of the brief period when studio capital was able to, and was necessary to, give a musician access to a large audience (and vice versa).

I’ve seen a couple of the new 3D movies. They look good if you’re in the rear center of the theater. Otherwise, they don’t look good to me. I think that they render each camera angle with the assumption that the viewer is looking at the screen at a level angle along the center line. If you’re in front of the theater on the side, it looks horrible.

25

novakant 09.24.09 at 12:03 am

In the movie industry, I’d recommend that movie theatres consider going to IMAX across the board, and that Hollywood start making movies with that as the base format.

You don’t seem to be aware what a cumbersome and incredibly expensive process filming in the IMAX format is and the same goes for distribution and projection. Essentially the consequence of your suggestion would be that films could only be made by big studios with deep pockets. Also, the vast majority of productions are simply not suited to the IMAX workflow.

In the age of increasing democratization through digital technology (you can get a RED camera, which shoots at 4K, with lenses for around $25.000 and set up a more or less professional editing and color grading suite for an additional $10.000), relying on expensive gimmicks and focussing “user experience” instead of content would be exactly the wrong signal to send.

The whole problem could easily be solved, if people respected respected creative work as they used to and stopped pirating films.

26

Substance McGravitas 09.24.09 at 12:49 am

The whole problem could easily be solved

What’s the problem?

27

novakant 09.24.09 at 2:53 am

What’s the problem?

Seems to me the problem is quite clear:

The problem with the movie home viewing market is that there is a substitute that is relatively good, and cheap-to-free – pirated movies via your BitTorrent service of choice. (…) I would be thinking very, very seriously about ways to differentiate my product and move into a more secure market where individuals were less likely to be able to upload free competitors to my product and hence cut my margin to ribbons.

28

Substance McGravitas 09.24.09 at 3:11 am

Seems to me the problem is quite clear:

I don’t take it for granted that an industry maintaining a market it’s always had is the same thing as a problem I should be concerned with.

29

Cryptic ned 09.24.09 at 3:28 am

But you do take it for granted that when someone says “The problem”, it means “The problem that I should be concerned with”.

30

Substance McGravitas 09.24.09 at 3:51 am

Well, sure, the problem of how to get people to buy X can be a fun one.

Is there some larger problem afoot?

31

novakant 09.24.09 at 12:09 pm

I don’t take it for granted that an industry maintaining a market it’s always had is the same thing as a problem I should be concerned with.(…) Is there some larger problem afoot?

Yes, because we are not talking about toilet paper, but about the future of an art form and a pretty amazing one at that. Now, of course one could say that, say, all these guys:

http://archive.sensesofcinema.com/contents/directors/index.html

should make (or have made) films in IMAX 3D format or whatever, and otherwise sod them, who cares – but that seems rather callous and ignorant. Of course if you don’t care all that much about film, you don’t care, and there’s not much that can be done about that. But a lot of people do, without even taking into account those involved in the production, distribution and marketing of film, whose livelihood depends on it.

32

Substance McGravitas 09.24.09 at 2:00 pm

Of course if you don’t care all that much about film, you don’t care, and there’s not much that can be done about that.

But I do. And films are being made. Every city worth being called a city seems to have a festival with films to show. And people watch them, one way or another.

It may be that the communal experience of film is going away, and I’d miss that, but I don’t see evidence of the death of an art form.

Are there fewer films being made now?

33

novakant 09.24.09 at 3:39 pm

Films will always be made under whatever economic circumstances – so no, film as an art form will not vanish. But that in itself does not mean that piracy doesn’t have a very tangible effect on the film industry and the people involved with it – if some restaurant customers consistently refused to pay for their meals, just because they somehow could, there would still be restaurants, but they would have a harder time staying in business.

34

Salient 09.24.09 at 4:02 pm

The whole problem could easily be solved, if people respected respected creative work as they used to and stopped pirating films.

I dispute the “as they used to” as facts not in evidence.

35

novakant 09.24.09 at 5:30 pm

I dispute the “as they used to” as facts not in evidence.

Well, I can’t look into people’s hearts. Maybe they really wanted to distribute the album they bought to hundreds of thousands of people for free. They couldn’t. Maybe, if shoplifting, fare dodging or tax evasion could be done with minimal risk of getting caught, people would do that as well. They can’t.

36

Chris 09.25.09 at 3:01 pm

Maybe, if shoplifting, fare dodging or tax evasion could be done with minimal risk of getting caught, people would do that as well. They can’t.

In some places and times, people have been able to do those things with minimal risk of getting caught. They almost always do.

Also, almost everyone who buys an album distributes it to *some* people for free, at least in the sense of playing it for them. Only a few want to share it with hundreds of thousands, but then, it only takes a few.

I would also point out that the arts have been around before copyright and commercialization and will almost certainly be around after (especially if humans in general have more leisure time).

It may become harder to make millions of dollars making a film, but I don’t see that in itself as something necessarily worth preserving. Certainly it leads to being able to make films that cost millions of dollars, but since the cost of filmmaking is declining precipitously, it’s not clear that you need that kind of massive resource approach anymore. (It’s also not clear that it ever produced, or currently produces, better films than the alternatives.)

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