In Reel Time

2010.37 Imax to partner with Laser Light Engines

IMAX, which specializes in immersive motion picture technologies, recently signed a deal with Laser Light Engines for development of high brightness technology systems exclusively for IMAX digital theatre systems.

Under the terms of the agreement, IMAX will make an equity investment (of undisclosed amount) in Laser Light Engines; who in turn will develop a custom version of its laser light technology for exclusive use in IMAX digital projection systems. Laser Light Engines will also develop custom features to help enhance the IMAX experience. Additionally, LLE’s technology won’t be available to the general market for two years, and to other large format theatre systems for three years.
Laser Light Engines designs, develops and manufactures OEM laser-driven light engines that provide high brightness, long lifetimes, energy efficiency and color control capabilities.
One particular challenge of theatrical 3D is that the viewer’s 3D glasses filter out a significant percentage of the available luminescence as they “trick” the mind’s eye into seeing a 3D image. That means that a brightness that is adequate for 2D viewing is insufficient for 3D exhibition, and many viewers consider 3D movies to be too “dark.” This challenge is the backdrop for IMAX’s interest in LLE.

IMAX screens typically go from floor to ceiling, and extend to the edge of viewers’ peripheral vision, which creates an immersive experience. Their sound system is of exceptionally high quality. The company’s 3D theatres even further increase the viewers’ feeling of immersion. Most IMAX theatres feature a steeply inclined floor which allows each audience member a clear view of the screen.

The deal is subject to due diligence.

IMAX has had a busy year thus far in 2010 – quickly signing up deals to open new theatres around the globe. Most recently, on July 15 they announced an agreement with Lumiere Pavilions, one of the fastest growing private movie exhibition chains in China, to open three new theatres, one a year starting in 2010. This deal brings the total number of IMAX theatres scheduled for operating in China by 2012 to 57. The total number of IMAX signings announced this year is 95, as compared to 35 systems during 2009. And the mix of openings signed spanned the globe with sites to include Japan, the Philippines, Thailand, Singapore, Russia, the Ukraine, Croatia, France, the Netherlands and the UK. They have also expanded an earlier agreement with AMC by adding 15 to 25 more theaters to the original 104 agreed upon.

Inception, which opened on a record 197 IMAX screens over the past weekend, was also the top grossing picture, taking in $60.4 million.

The company will announce earnings on July 29.

2010.36 RealD IPO prices at $16, stock closes Friday at $19.50

Following up on our two prior posts on this subject (April 20 and June 30), we now report on the consummation of RealD’s IPO.  Highlights as follows:

• Offering size increased from 10.75 million to 12.5 million shares.  All the incremental shares come from shareholders, so the company sold 6 million shares as previously planned and shareholders sold 6.5 million shares.
• Share price increased.  On June 30, RealD had gone on the road with an estimated price range of $13 – 15 per share.  The IPO priced at $16.  This cannot be considered a shocker, given that the NASDAQ had traded up over 6% month-to-date through Thursday’s close.
• Total offering generated gross proceeds of $200 million, and the company received net proceeds of $82.6 million.  That ought to finance a few more deployments…
• Timing is everything.  Not only did RealD likely benefit from the good performance of the equity market in July, but they priced their offering just before a 261 point decline in the Dow on Friday.
• Strong aftermarket performance.  After pricing at $16 Thursday night, the stock traded as high as $21 in early trading Friday morning before closing at $19.50 per share (up 21.9%).  Aftermarket performance for IPO’s in 2010 has not been generally strong, so this definitely counts as a successful start to RealD’s tenure as a public company.
• Valuation update.  At the mid-point of the June 30 range ($14/share), RealD’s implied valuation was $725 million.  At the actual pricing of $16, the valuation was $828 million.  At the Friday closing price of $19.50, the valuation is a cool $1 billion.
• “Greenshoe” from the shareholders, not the company.  As is typical for an equity offering, the underwriters have received a 30-day option to buy another 15% of the deal – in this case, 1.875 million shares – at the same price per share.  In this offering, the additional shares would come from existing shareholders, not the company.  With the stock price well above $16, it currently looks like a safe bet that the greenshoe will be exercised.
• 3D validated by the public market as a significant growth opportunity, and RealD established as the leading pure-play company in the space.

On behalf of Hadley Partners, congratulations to the founders, management, employees and investors in RealD!  We look forward to continuing to follow the company as friends, bloggers and investment bankers.  One of my friends and former co-workers at BT Alex Brown, Andy Howard, has represented Shamrock Capital on the board of RealD since Shamrock’s investment in the company, so my particular congratulations to Andy.

Have a great weekend, everybody!

2010.32 RealD gets closer to its IPO

On June 28, RealD filed an amendment to its S-1 registration statement in preparation for its IPO.  This amendment has the kinds of details – the shares to be sold, valuation range, selling shareholders – that suggest the company is ready to take this offering on the road.  I would expect this roadshow to begin asap.

This registration statement amends the company’s filing on April 9, 2010.  Please refer to our previous post on that filing.

Highlights of the amendment are as follows:

• Expected offering size and valuation.  The company is proposing to sell 6 million new shares at a price range of $13-15 per share.  At $14 per share, the offering generates $84 million in gross proceeds ($75 million net).  This is a lot less than some people’s estimates of $200 million based on the April filing, but it certainly does the job.
• At $14 per share, the implied pre-money valuation for the company is $725 million.  That valuation includes the impact of warrants and options granted to employees, key exhibitors and others.
• In addition to the 6 million shares to be sold by the Company, existing shareholders are looking to sell 4.75 million shares.  Most existing shareholders are selling a portion of their holdings – Michael Lewis and Josh Greer (the founders), Shamrock, Pequot and others.
• The company’s March quarter was huge.  RealD did $113 million in gross revenue in the nine months ending December 2009.  Just in the March 2010 quarter, the company’s gross revenue exceeded $76 million.  Avatar was the primary driver of this spike in revenues, which the company warns will not be repeated in the June quarter.
• The company’s rapid deployment continues.  Just between March 26 and June 1, RealD’s deployed screen count increased from 5,321 to 5,966 (up 12%).  The 14,000 screen deployment by Digital Cinema Implementation Partners (discussed in our April RealD post) will represent dramatic growth.  The cost is that the company is forecasting $40 – 50 million of capex in the March 2011 fiscal year.
• Growth creates its own challenges.  For example, the company’s freight and logistics expense grew $16 million in the March 2010 year to handle the logistics of eyewear.  Further, the company forecasts that it will spend $4 – 7 million in the June and September quarters to cover expedited shipping of eyeglasses and to build eyeglass inventory.  The logistics of handling expensive 3D eyewear remain a difficult operational challenge for the company and exhibitors.
• RealD sees continued growth in the 3D movie pipeline.  They estimate that 23 3D movies will be released in 2010 and 33 will be released in 2011.  By comparison, there were 27 3D releases in the entire 2005-2007 three-year period.
• RealD’s board is going Hollywood.  Upon the consummation of the IPO, Frank Biondi Jr., James Cameron and Sherry Lansing are all joining the board.  Biondi has served as CEO of both Universal Studios and Viacom.  James Cameron, of course, is the force behind Titanic and Avatar.  Sherry Lansing is a longtime Hollywood player who was once president of production at 20th Century Fox.
• The company has sharply raised its own estimate of its value.  Remember per our April post that RealD has to account for the warrants it issued to exhibitors by estimating the value of its stock as those warrants vest.  As of March 2010, management estimated the company’s per-share value to be $23.07, up 65% in only three months.  This does create the anomalous situation that RealD is preparing to sell stock to the public at a significant discount (35 – 43%) to the board’s estimate of value.
• Don’t let them confuse you with a stock split!  The company has effected a 3-for-2 stock split since its April filing, so any quick per-share comparisons are risky unless you are clear on whether you are talking pre-split or post.

With the Dow Industrials down 268 points yesterday and 92 points today, perhaps RealD’s biggest near-term worry is the market.  Stay tuned for the roadshow!

2010.28 Toy Story 3 – to infinity and beyond?

Last Sunday, as we drove by a Shrek Forever billboard, my nine year old daughter told me that she wasn’t going to see the movie. She declared that a trick the studios use is to make one good movie then follow it up with a bunch of bad movies under the same name. She then stated that they especially use the trick on children. She doesn’t seem to be alone in her wariness toward the studios’ summer slate as Memorial Day weekend attendance was the lowest since 1993. Box office receipts for the following weekend were down 24% compared with the like period in 2009.

So how is the new calendar market really doing? After all, last year (2009) box office receipts were up. The time period between May and Labor Day typically accounts for about 40% of annual ticket sales. Yet since early May, with the strong “Iron Man 2” release, total domestic box office revenue has fallen about 6.4% to $1.02 billion from $1.09 billion a year ago. This past weekend was up 11% with the strong $56 million (over three days) release of “The Karate Kid” yet a lot of high profile sequels such as “Sex and the City 2” (with some of Warner Brothers worst reviews ever) have disappointed.

What ails the calendar? I’ve researched the expert comments on and offline. An improved economy means that consumers no longer flock to movies as a relatively inexpensive entertainment option. Ticket prices are also up (so tickets aren’t as inexpensive which consumers may not appreciate even if they have the money to spend). Despite the 3D hype only one major 3D movie has been released since May – “Shrek Forever”. But I’m also reading a lot of articles questioning the momentum the current crop of movies has been able to build. And if the audience is already wary of the calendar will the summer prove to be a disappointment?

Last year – during this same summer time window – eight action fantasies and animated films topped $150 million, including four that had already been released by today’s date (“Up”, “Star Trek”, “X-Men Origins- Wolverine” and “Night at the Museum: Battle of the Smithsonian”). Thus far, the current crop of movies isn’t matching that performance.

What’s on the slate for the rest of the summer? At least four 3D movies, including “The Last Airbender” and “Despicable Me”. The much advertised during last night’s Lakers game, “Knight and Day” with Tom Cruise and Cameron Diaz and “Grown Ups” with a slate of five names (though none of the seven actors in those two films has broken the $150 million mark since 2005). “The Twighlight Saga: Eclipse” will be released on June 30. Will Ferrill, Julia Roberts, Angelina Jolie and Sylvester Stallone all have a movie in the cue. And, let’s not discount the possibility of a smaller surprise hit making an impact.

Two links for the summer calendar and related previews are: The movie insider and Teaser-trailer.

I quote my children often on media related topics because they view the various options without a legacy overhang. Hearing my daughter’s comment yesterday – coming from someone who thought the Squeakquel was one of the best movies of all time – and then reading an article in this morning’s NY Times about viewer malaise with the current movie calendar re-kindled some issues I’ve already discussed herein. How can content providers define and target quality experiences to viewers who have so many other options? Can they continue to re-tread the names and story lines that worked in the past? If nothing else, they continue to try.

To be fair, the studios’ core strength is their ability to finance large budgets and give them worldwide visibility and distribution, and to maximize revenue in all forms (including games, licensing and spin-offs). Quality? Well, we can debate that term forever (and I have).

Truly, some franchises continue to work. I’ve already posted an earlier photo from ShoWest in which I’m flanked by Buzz and Woody. We’ll be in a theatre for “Toy Story 3” because Pixar has done a great job in maintaining the franchise’s quality. Like most movie goers I’m perfectly happy to pay for an extraordinary experience.

What movies have you seen this summer that justified the time and expense involved?

Note on the picture – The Toy Story 3 preview can’t be embedded from YouTube as the embed code is blocked. So, I did The Karate Kid instead and highly recommend the clip. It was cheaper – also – than buying a picture from the photo source I use. Example of pricing model issue?

2010. 22 Reflections on quality from Digital Hollywood and The Cable Show

Recent wanderings got me pondering quality – across many fronts, from content to technology to the overall experience.  The definition, of course, can hinge on what side (economically) you represent.  Is quality an intangible that we recognize, like obscenity, when we see it but can’t articulate in concrete terms?

At Digital Hollywood a few weeks ago I listened to two different panels that addressed quality but from very different perspectives.

The first panel consisted of representatives from studios, media distributors, agents and creatives.  One of the studio panelists addressed quality by saying, “For us quality means we need to have a celebrity or other name attached otherwise it just isn’t quality content.  We are an old media company after all.”

In contrast, a 3D panel, with representatives from AEG Live, IMAX, Sony, 3ality, Cinedigm, Reliance MediaWorks, a movie director and the 3D VFX Supervisor from Avatar, addressed quality very differently.  The participants discussed aesthetic challenges along with making and presenting 3D content.  Their entire focus was on the overall consumer experience and how it had to justify the added ticket cost.  Quality meant that the consumer experience had to be exceptional.  I asked myself if perhaps James Cameron had been the “name” that attached itself to the whole 3D ecosystem enabling it to break out as a hot “new” industry focus.

Still pondering this issue of quality I headed up to San Francisco (sure to get some “techie” inputs).  Running into Rich Maggiotto of Zinio, we flipped through his company’s assortment of magazine and related pages on an iPad (many of the top magazines are available for subscription viewing through Zinio on a PC, iPad or iPhone and the experience is stunning).  He showed me a few newer online ad options and I would watch them (I usually don’t).  I asked Rich about quality from his perch.  He spoke of the user experience and the tough balance of providing branded or name content while weighing the extensive list of popular alternative content that the consumer can get so easily.

Flying home I wondered about the studio audience bleed.  The vast majority of media-related dollars (content not technology) come from what is termed old media sources.  Yet at the consumer level little distinction exists between old and new media as they continue melding together.  Has the definition of quality changed?  Or does it rest, ultimately, in the individual?  Chris Anderson, years ago, in his Wired piece on “Free” used the example of his kids – if given a limited two hour window to watch content – choosing not Star Wars the movie but YouTube videos of Lego Star Wars characters made by other nine year olds.

My last step pondering quality occurred when I attended The Cable Show at the Los Angeles Convention Center.  The exhibits were lavish and celebrity-strewn.  The show was visually stunning with large, high def screens lining the aisles.  Every step of the media distribution (cable) process was represented; from the studios, to the cable companies, to technology providers and enablers.  Cablevision had one of the best and most lavish booths refreshment-wise with nice champagne, assorted ice creams and a coffee bar.  The first two were known brands while the later was brand-less.

And that offering, by a cable company, sums up my current state of mind with respect to quality.   The flavor or form often varies per person or their mood (I had a coffee, later in the day maybe it would have been champagne; 24/7 my kids would have chosen ice cream).  But you aim to provide the best overall experience, ensuring that each offering tastes good, and let the consumer decide for themselves.

Challenges faced in the continuing battle to provide and monetize a consumer experience will always rest on consumers’ ultimate determinations of quality.  As the various providers along the value chain try to provide an experience based on an amorphous but sometimes recognizable definition the consumer continues to benefit.  From 100 plus channels, to the iPad, 3D, Glee, Avatar, YouTube (my kids’ favorite) quality itself is being monetized, sometimes more directly than indirectly.

I’d greatly appreciate hearing what others think of quality.

Ideas came from, other than the people above:  John Rubey, AEG Live; Greg Foster, IMAX; Buzz Hays, Sony; Angela Wilson, 3ality Digital; Chuck Comisky, Avatar; Keith Melton, director; Jonathan Dern, Cinedigm; Jim Hannafin, Reliance; Marty Shindler, The Shindler Perspective; Keith Quinn, Paramount; Pam Schechter, NBC/Universal; Jonathan Foqualityrd, ContentFilm International; Chris Jacquemin, WME Entertainment; Michael Kernan, NuMedia Studios.



2010.20 Digital Hollywood halftime highlights

Longer blog post to come … but after two (out of four) days at Digital Hollywood at Loews Santa Monica, a few comments, inputs, ideas and debates stand out so far.

1. The best comment of the show so far came from Paul Colichman, co-founder and CEO of Here Media, who articulated a core belief of his company, “If you make it too expensive or too difficult for consumers to get, they will steal it from you. So make it so that they don’t want to steal it for you. If they are going to steal it, make it from you and not someone else (so you can at least make some advertising revenue off it).”

2. My personal second favorite insight came from Kevin Yen – YouTube’s Director of Strategic Marketing (and at Google for years before that). After not answering many questions (to be fair, he was asked to provide some very specific, thus far undisclosed numbers – not something the representative of a public company can just do) he came out with a worthy insight. Asked about what he was surprised to hear so little covered in the press, he answered the inevitable interface changes that would occur when television and other content was delivered mainly (or increasingly) over the Internet. Deflected momentarily from the point, he then added a comment about social networks such as Facebook and other types of customization (so no Google search for a TV listing) perhaps forming a base for such interface.

3. A panel called “Beyond Avatar” discussing 3D was surprisingly unattended (after the 3D buzz at both ShoWest and NAB). The panel included John Ruby, AEG Live; Greg Foster: IMAX; Buzz Hays, Sony 3D; Angela Gyetvan, 3ality Digital; Chuck Comisky, 3D Stereo VFX Supervisor on Avatar; Keith Melton, director; Jonathan Dern, Cinedigm Entertainment Group; Jim Hannafin, Reliance MediaWorks; and Marty Shindler, The Shindler Perspective. It was an amazing panel and full of highlights. My favorite (and it’s so hard to pick) is that current screen capacity for upcoming movie releases is less than half the 10,000 needed. A second was that many of the technical production givens had to be thrown out with 3D because the visuals are so different (such as that you can’t break the plane since 3D has no screen plane).

4. Ross Levinsohn of Fuse Capital said that he loves advertising and ad based businesses. Media has been ad based in the past to the tune of $85 billion a year ($40 billion untargeted). That’s a lot of dollars to shift. The ad networks – centered around remnants – have destroyed the Internet.

I don’t traditionally like ad only supported business models (Google being, as always, the exception) but Levinsohn made a great point. No one can ignore the shift of so many billions of dollars spent (or discount it too much even if it doesn’t result in a dollar for dollar end game shift).

5. Sharon Waxman, Editor in Chief of TheWrap (which just raised $2 million in funding) said she realized network news was dead when she was interviewed in an over the top deluxe Beverly Hills hotel suite with cameras, lights etc. and asked the same type of questions she asks using her Flip video camera. End conclusion being true or not, she raised a good point.

6. With about thirty pages of notes in my pad I started asking people I met at the show what I should write about on the blog. Two recurrent answers: customization of the consumer experience (a crime it isn’t being done more yet) and that no one yet has figured out a working business model to monetize content (we bundle up a disparate bunch of revenue streams and hope it is a business model; at least now people have had some time to test what works and what doesn’t and some things seem to be working – even if only on a limited scale)

7. I prefer conferences in Santa Monica to those in Vegas (I live in Santa Monica).

More to come later in the conference and upon further reflection. These are the few immediate thoughts that stuck.

2010.18 RealD files for an IPO

NOTE: this posting was slightly delayed because we were busy last week in connection with NAB.

On April 9, 2010, 3D technology company RealD Inc. filed an S-1 registration statement for an IPO. This is our second post this week on IPO’s. That is some coincidence, but it also reflects the fact that the IPO pipeline is the strongest it has been since before the financial crisis. A select group of entrepreneurs should be paying attention. As a service to our dear readers we thought we would provide summary and perspective on RealD’s filing.

RealD’s business is growing nicely. RealD generates substantially all of its income by enabling 3D viewing of motion pictures in theaters, both installing 3D projection equipment and providing eyeglasses for viewers. As of March 26, 2010, the company had its proprietary technology installed in 5,321 digital theaters. This number is up 152% from 2,108 screens in March 2009. Further, the company is working to install another 4,900 screens pursuant to agreements with existing licensees.

The Company is aligned with Digital Cinema Implementation Partners (DCIP). The three exhibitor co-owners of DCIP – AMC, Cinemark and Regal – are all licensees of RealD. Given that DCIP completed $660 million in financing in March to continue its digital cinema deployment, that roll-out should give RealD a tailwind of new theaters to support. DCIP’s financing will fund the digital deployment of approximately 14,000 screens. RealD’s exhibitors also have penny warrants equal to 8.9% of the Company’s pre-IPO shares – while no individual warrantholder reaches the 5% threshold required for disclosure in the S-1, it is safe to assume that the DCIP owners hold a chunk of these warrants.

The Company has recently valued its equity at $578 million. Other than paying a registration fee to the SEC for aggregate IPO proceeds of up to $200 million, neither the Company nor the underwriters (JPMorgan and Piper Jaffrey) take a view on RealD’s IPO value. However, for accounting purposes the Company is required to value its exhibitor warrants as they vest, because the value of such warrants must be deducted from revenue (as if they were a sales allowance, which in a way they are). In December 2009, the Company estimated the fair value of its common stock to be $21 per share, which suggests a pre-IPO equity valuation of $578 million.

RealD’s business model is a direct play on the commercial success of 3D. RealD is definitely eating its own cooking. By the terms of the majority of its exhibitor deals, RealD buys and installs the necessary equipment at the exhibitor, and then collects a per-attendee fee from the exhibitor. The exhibitor thus takes limited risk (they are giving RealD some exclusivity), while RealD has a business model with some capital intensity (they buy and install the equipment up front) but high margins on incremental revenue. So…

RealD should be marketing its IPO on a terrific March 2010 quarter. Because of RealD’s business model as noted above, the March quarter should be strong. Avatar was released 12/18/2009 and rolled well into Q1, and Alice in Wonderland was released 3/5/2010. Those two smashes alone should give the company continued strong growth.

RealD’s bet on 3D is a slightly different play than, for example, Cinedigm’s (NASDAQ: CIDM) economics on digital cinema. Cinedigm gets a “virtual print fee” from a studio every time it delivers a digital movie file to a screen. Oddly, Cinedigm’s revenue goes up with the velocity of movies delivered, not how long they stay in theaters. So for example, Avatar’s long run in Q1 will modestly depress Cinedigm’s results, while the big Avatar gate will favorably affect RealD’s. That difference works both ways, a quarter of weak releases will probably help CIDM and hurt RLD.

It’s the glasses, stupid. Currently, RealD’s income statement is dominated by eyeglass sales, not exhibitor licensing. For the nine months ended December 2009, gross licensing revenue was $44.4 million while product sales (eyeglasses) were $68.4 million. The licensing business is highly profitable on a stand-alone basis, but the gross margin on eyeglass sales is currently negative (RealD lost $9.2 million on its eyeglass sales).

RealD is handling eyeglasses differently in North America and overseas. In North America, it is receiving a per-admission eyeglasses fee from the exhibitor, and is assuming that eyeglasses last eight weeks for the purposes of amortizing their cost. Overseas, RealD is selling the glasses outright. As anybody who has seen a 3D movie knows, the glasses are a logistical challenge for the exhibitor, and Joe Morgenstern at the Wall Street Journal has written about the quality issues with 3D glasses (subscription required). RealD is working to increase recycling of glasses and generally to reduce their cost. In the long term, this logistical challenge is probably second only to the success of 3D generally in determining the long-term profitability of the company.

3D in the home – just starting. The Company is working to license its 3D technology to consumer electronics manufacturers, and also has 3D technologies on the way which do not require eyeglasses. However, these initiatives do not yet have any impact on the Company’s revenue and near-term prospects. This IPO will be bought and sold largely on the prospects for theatrically released 3D content and RealD’s competitive position.

Stay tuned for updates as the IPO proceeds!

2010.15 My NAB highlights … the top 10

Over 1,500 companies are on the NAB (click NAB for site) floor, and 479 of them are non-US based. Below is my attempt to edit a huge show into a few minutes. My personal show highlights….

1. 3D is the talk of this show. The lines to watch demos were long at Sony (Sony’s Hiroshi Yoshioka gave an opening keynote in which he stressed consumer demand for 3D), Panasonic and others. Buzz remains that 3D is the next technology invention to save the entertainment industry. Options are growing quickly and costs are coming down.

My specifics: I saw a great panel – with demo videos – on 3D sports. Incredible; and I’m one who generally doesn’t get excited about sports. On the panel were Anthony Bailey, Phil Orlins and Bob Toms from ESPN and Vincent Pace of PACE (and Avatar). Glen Dickson from Broadcasting and Cable Magazine moderated. I learned that the event rights holders were driving the production demand and that viewers are eager to watch the resulting product. Thus far, it is still a next generation experience and not a replacement for regular 2D sports. Not enough legacy work has been done to automate the process. Indeed the cameras often need to be placed lower to the action than are traditional cameras and the graphics must be scaled back so the screen doesn’t look too busy. Listening to Vincent Pace, a true 3D innovator, discuss the aesthetic challenges inherent in shooting 3D sports gave me my own Steve Jobs/calligraphy moment: I now view the images floating across the screen in an entirely new way.

2. Gadgets still sell… regardless of a recession.

How many panelists had iPads? Well, given the so recent Apple introduction they were pretty ubiquitous. One set of panelists agreed that the iPad is great for media or surfing the web on their couch but, as it didn’t fit in their pocket, wasn’t even to close to replacing their cell as number one.

I learned that Android smartphones now make up close to 7% of the market.

And, the GoPro HD Hero Naked is the coolest gadget of the year in my book (so far). The company has a booth at the show and their camera sold out of the NAB store in less than a day (at about $200). They make wearable, high quality HD cameras for sports. Waterproof, many versions (not just the Naked) including ones that fit on your surfboard – race car – bike – or wrist, durable (obviously) and great quality shots either as a video or a series of stills. Want to surf inside the curl of a wave at high definition? See the whole story by clicking GoPro.

3. The lack of available bandwidth and carry fees continue to be core issues. FCC Chairman Julius Genachowski gave a speech in which he discussed the FCC’s broadband plan. Broadcasters will be “encouraged” and “incented” to give up some of their broadband spectrum to be re-allocated to telecom companies.

“We’re at serious risk as a country in not moving quickly enough on our technology infrastructure and in other areas to remain the world’s leader in innovation,” he said.

The day prior, in another speech, NAB president Gordon Smith had compared the Chairman’s request for spectrum to Vito Corleone, in The Godfather, making people offers they couldn’t refuse. Chairman Genachowski joked back about the comment saying that as a result of the analogy “all the good restaurants have been offering to comp me.”

Later that day, a consortium of many of the countries’ largest broadcasters struck a deal to create a joint venture that would develop programming for mobile devices. The content provided could reach up to 150 million people (broadcast by them on their existing spectrum). Click article to read the entire story.

Chairman Genachowski also said that the agency is looking into (and looking for comments about) retransmission fees. We all remember the battle between Disney and Cablevision in March, during which certain Cablevision subscribers were threatened with no Oscar broadcast. He didn’t give any insight as to what the FCC will decide, just that Time Warner Cable and a few other like companies had asked them to look into the issue.

4. Multi-platform is a big buzzword. I liked how Dana Walden and Gary Newman, co-Chairmen of Twentieth Century Fox Television (Joe Flint of the LA Times moderated), described it in the context of Glee (click to see videos), their hit music show . They explained that the goal was to get the content into as many channels as possible – some of which are for marketing and not direct payment. Consumers all still appreciate quality content with universal themes and strong characters. Studios just have to be more creative in finding multiple channels in which to monetize the content. Glee did that, in part, through music, with a show over the summer, albums, etc. And, content needs to be monetized more quickly now (forget the days of relying on syndication or DVDs in a few years – 24 was put on DVD right after the first season ended). However, the idea of the network season, they stated, is still sacrosanct.

I also sat in on a mobile TV panel with execs from companies that included: Transpera, IBM Global Business Services, Flo TV, AT&T, MobiTV and Ion Media TV (if I missed you please let me know – the program differed from the actual speakers). For mobile, do we just use the content that exists? Not exclusively; though we do use it and cross device content portability is increasingly important. Currently, online narrative shows are watched more often on PCs; news and sports are viewed more on a mobile platform. On Flo TV their average viewer watches 25 to 30 minutes of mobile TV daily.

Overall, media viewership time itself is up dramatically. But the related revenue is going to different people (Apple, telecom carriers, concert promoters as opposed to music companies). From IBM’s Saul Berman, 4G will be the real inflection point of mobile television…if only we had the bandwidth to support the coming demand.

5. Ray Kurzweil matters. When I asked people I met what most struck them about the show his speech came right after 3D. In a keynote, he spoke about the acceleration of technology in the 21st century. No matter what the related topic he knew and could speak about it brilliantly. Agree or disagree … he’s an impressive guy. Click Ray to learn more about Kurzweil and singularity.

6. Social networking was another hot button. I attended a few panels on how to create a presence, market, advertize, brand, organize and more. Essentially, we’re in the early stages of the social networking reality. People will add more specialized social networks and means of organizing them but privacy (to a certain extent) is gone. Network.

And, social networking has become content.

7. People were spending. On Tuesday afternoon I couldn’t fight my way through the store and certain items were beginning to sell out (including some books!).

8. One of my cab drivers mentioned that Nevada unemployment is at 23%. For some even softer data, she told me that last month, finally, the larger strip-based casinos were busy. During the worst of times the smaller casinos were the only ones that had any business because they catered to a local clientele.

9. Convergence? The means of production haven’t changed as much as the means of consumption keep evolving. I saw a lot of cameras and reporters from paper based media companies. On display were satellite dishes, companies that build sets or send trucks. But the digital technology companies were out in full force (and filled some pretty large spaces).

10. Harmonic was the only booth (in my experience) whose reps didn’t just scan NAB badges for attendee information. Rather, they asked to look at a business card – it was given back – to get information, then asked about my company and interest in theirs so they could direct the information to the appropriate person within Harmonic (who would then respond). Smart.
The above is by no means a summary of NAB. It’s merely one person’s comments regarding what she saw and heard in a few days. Click Harmonic to learn more about the company.

The above is by no means a summary of NAB. It’s merely one person’s comments regarding what she saw and heard in a few days. Anyone who wants to add their own list please do.

To learn more about our firm please go to hadleypartners.com at link.

2010.04 3D Movies – Better Technology, or Better Pricing?

So Avatar is the top-grossing film in history, both domestically ($700 million+) and globally ($2.5 billion+).

That doesn’t mean that Avatar has sold the most tickets.  According to Brandon Gray at www.boxofficemojo.com, Avatar had sold meaningfully fewer tickets than Titanic through February 2, and extrapolating his analysis that is still true.  Part of the reason for Avatar’s higher box office is general ticket price increases.  According to NATO (National Organization of Theatre Owners) statistics, the average price of a 1997 movie ticket (when Titanic was released) was $4.59, while the average price in Q4 2009 was $7.61 (a 66% increase).

But another big reason for Avatar’s box office record is that, again per boxofficemojo.com, 81% of its domestic gross is from 3-D presentations, either IMAX or otherwise.  IMAX average price per ticket is $14.58, and other 3-D tickets are averaging about $10.  That is either a 92% premium (for IMAX) or a 31% premium, depending on which flavor of 3-D you get.

As a movie lover, as a student of media services and as the father of four children, I have seen several 3-D releases: Avatar, Hannah Montana: The Movie, U2 and a few animated movies come to mind.  At the risk of offending some friends in the business, I like 3-D but am not blown away by it.  I haven’t yet seen anything commercially where 3-D vs. 2-D was the difference between wanting to see it and not, nor has it dramatically changed my experience.  I have seen a few tests, including of sports, that get me more fired up about its potential.

But even if you don’t care about 3-D, there is another reason to like it: it brings tiered pricing to a market that largely charges one price today.  Various reports suggest Paranormal Activity cost $11,000, or maybe $14,000, to make.  Estimates of Avatar’s cost also vary widely, but $250 million is in the range.  Paranormal Activity is 99 minutes long, Avatar over 150 minutes.  And yet, at almost every theater in the country, the price for a 2-D ticket would be the same.

So that gives rise to several thoughts that I will leave you with:

• Is 3-D’s primary economic benefit that it represents a politically correct way to charge more for a premium experience?
• To avoid cannibalization, will certain movies only be released in 3-D once the rollout of digital cinema/3-D is more advanced?  Or perhaps limited 2-D releases?
• And finally, can somebody name another product/service where there is as little differentiated pricing as in the movie business, at least prior to 3-D?  There is some differentiation around the edges: dollar houses mostly for older movies, IMAX (150 screens in the US, out of 40,000).  And of course there is matinee pricing and student/senior citizen discounts.  But otherwise, no matter how expensive, long or popular the movie, or how good your seat is, there is generally a single price.  Riddle me that, Batman!

Would be happy to try to give a microphone to anybody who can quickly articulate why it is the same price for each ticket…

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