Will the Credit Crunch Squeeze Monsters vs. Aliens?

Monsters vs. Aliens
Source: monstersvsaliens.com
Monsters vs. Aliens

This will be a monster-size weekend at the movies, and I"m not just talking about box office numbers. Yes, if you have kids, you're sure to find yourself at a matinee of "Monsters vs. Aliens," which is opening on 3,500 screens. The performance of this film is key for DreamWorks Animation; it's the studio's only theatrical release this year. And the success of the film in the 3-D format it was made for, will direct the future of the digital 3-D format. Right now 3-D is mired in the credit crunch; theaters and studios need $1.4 billion in credit to convert enough theaters to show the slew of upcoming 3-D movies. Without that financing, hundreds of millions of dollars of movie budgets could be for naught.

"Monsters vs. Aliens" debut Friday is a far cry from the exclusively 3-D debut DreamWorks Animation CEO Jeffrey Katzenberg planed on. The film will be on 1,500 3-D screens, the rest will be regular old 2-D. The studio spent an additional $15 million to make the movie in 3-D, on top of of its roughly $160 million budget. But 3-D movies cost about $3 more than an average movie ticket, a premium that the movie studios and theaters share. So not having those 2,000 additional 3-D screens means lots of lost revenue.

What now? We'll see if people are willing to pay the premium for the 3-D experience at those 1,500 theaters. I'm guessing that they will pay up - it's still a really affordable entertainment experience compared to a sporting event or concert. Having gotten a sneak peek of the movie in 3-D last weekend I have to say that it was by far the most impressive example of 3-D technology I've seen yet. Cool glasses, no headache, awesome animation. If people do pack the movie's 3-D screenings, that could help accelerate the pace of the 3-D rollout, giving Wall Street bankers proof that underwriting 3-D projectors will pay off.

A year ago Katzenberg told me he'd release the movie only in 3-D, fully expecting the rollout of digital 3-D screens would continue as planned, providing 5,000 3-D screens. Theaters and studios finally agreed on a plan to split the costs of the new technology. But last fall the credit crunch put a dramatic halt to financing the conversion of screens to Digital 3-D, at $70,000 a pop. In order for this technology to take off, the credit markets need to unfreeze.

This movie just can't escape the financial crisis. Now a stimulus from a bailed out bank might give its box office a boost. Bank of America is subsidizing a free upgrade for its customers to see Monsters vs. Aliens in 3-D vs. 2-D. As anyone could have predicted, this sparked a storm of criticism: is this really the right way for the bank to spend its money? Is there a guaranteed return on investment? Bank of America was smart enough to clarify that this customer program will only cost the bank $175,000. And who knows, maybe Bank of America customers will use those taxpayer dollars to see the movie in 3-D, which could help the rollout of the technology. And that would give a stimulus to the entire movie industry.

UPDATE:DreamWorks Animation just got me the most up-to-date numbers: The movie will play at over 4,000 locations on more than 7,000 screens. The company expects more than 2,000 3-D screens, including 147 in Imax.

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