James Cameron’s 3D epic Avatar

America’s largest gathering of movie theatre owners has changed names, but the debate remains the same.

2D or not 2D?

The question — whether movies are worth the multimillion-dollar investment to become three-dimensional — has split filmmakers, studio executives and the 6,000 exhibitors who gather in Las Vegas every year to talk show business.

Lately, though, business has been off. Last year marked the second-lowest attendance since 1995.

And last year pales compared with this year. Revenues are at $2.2 billion, down 19% from the same period last year. Attendance has fallen more sharply; Americans have purchased 272 million movie tickets so far this year, about 20% fewer than the 341 million they purchased the first three months of 2010, according to Hollywood.com.

The numbers, and the ground that exhibitors must make up this summer, could provide a solemn tone to the normally jovial CinemaCon convention, formerly called ShoWest. Where exhibitors once spent days sampling popcorn flavours and stadium seats, more attendees will be debating how to get moviegoers back into theatres.

Many believe the key lies in the third dimension. Some of the summer’s highest-profile films, including Rio, Transformers and the final Harry Potter, will feature 3D.

“Quite simply, a filmmaker who can design and tell his story with 3D tools can present an exceptional experience,” says Jeffrey Katzenberg, head of DreamWorks Animation, whose studio will release Kung Fu Panda 2 in 3D. “That’s what the audience wants.”

Others aren’t so sure.

“The novelty has worn off,” says Anne Thompson of the blog Thompson on Hollywood. “Filmmakers used it as a gimmick, and audiences got smart about it. That’s why you’re seeing dwindling returns.”

Indeed, the lustre seems to have faded from the technology, at least this year. The 3D animated film Mars Needs Moms and Nicolas Cage’s 3D action picture Drive Angry were mediocre performers at best. Only one 3D movie, Rango, has crossed $100 million.

Analysts also wonder whether the premium prices for 3D, which routinely eclipse $15 a ticket, dissuade moviegoers.

“The investment hasn’t been matching the return,” says Brandon Gray, president of Box Office Mojo.

The result has been marked by differences over how to affordably deliver 3D movies, now viewable on about a fifth of the nation’s 40,000 movie screens.

Some say studios should focus on cutting costs by converting more 2D movies to 3D. Opponents, many of them filmmakers, counter that the only worthy 3D movie is one shot that way.

“The short answer is we did too much with technology that wasn’t ready for prime time,” says director Michael Bay, whose Transformers: Dark of the Moon was shot digitally, in 3D and on traditional 35mm film.

“Studios are turning everything they can into 3D without considering whether it should be done at all,” he says. “We’re already wearing the experience out.”

Conversion controversy

That seemed impossible a year ago, when James Cameron’s 3D epic Avatar sailed past Titanic to become the highest-grossing movie of all time at $761 million. And despite last year’s attendance slide, seven of the 12 top-grossing movies had 3D scenes.

“We continue to see spectacular growth at the box office,” Katzenberg says.

But Jeff Bock of Exhibitor Relations says that because more movies are featuring 3D, they’re claiming a larger share of the box office. “That doesn’t mean people are showing up for the 3D.”

That growth has been a divisive issue for directors and studios, who differ on how great the public appetite is for the technology, particularly when a movie initially shot on film is converted to 3D. Converted movies such as Clash of the Titans, The Last Airbender and Piranha 3D garnered barbs last year from fans and reviewers for 3D that was dark, unfocused and devoid of much reason to exist.

Studio executives concede that the rush to convert pictures has made audiences savvy — and sceptical.

‘3D has to be an additive,” says 20th Century Fox chief Tom Rothman. “Fans know good 3D, and the saying is still true: You can serve no wine before its time.”

Yet those in the conversion business have been flooded with calls from studios looking to cash in on the 3D craze and convert a movie in eight or nine weeks — a rush job in the industry.

“We get a lot of 911 calls,” says Barry Sandrew, founder of Legend 3D, a 3D conversion company that worked on Alice in Wonderland and The Green Hornet and began as a colour-conversion firm.

The steep conversion costs — from $30,000 to $200,000 a minute to hand-draw on individual film frames — has drawn fly-by-night competition, Sandrew says.

“Conversion companies are coming out of the woodwork,” he says. “Studios are trying them out. More often than not, they don’t work out that well.”

And they can tarnish conversion’s reputation, says Legend 3D president Rob Hummel. He notes that Avatar included several converted 3D shots and says that when conversion is done well, “it’s indistinguishable” from natively shot 3D.

“It’s an art form. You’re not going to get a good 3D conversion if you only allow eight or nine weeks for the process.”

High hopes

But even there, filmmakers and studios disagree over what’s acceptable technology. Katzenberg, who became an outspoken proponent after seeing 2004’s The Polar Express, remains a sceptic of conversion.

While conversion quality “has gotten better, it’s still not in the same league at all” with films shot in 3D, which requires a minimum of two advanced cameras, he says. “Movies that are conceived and authored in 3D simply have a higher degree of quality.”

Not always, Michael Bay counters. “Look, there are simply some movies that shouldn’t be shot in 3D,” he says. “It doesn’t add anything.” But when it does, Bay is a 3D booster. No stranger to eight-figure film budgets, Bay says that studios need to make the financial commitment to 3D instead of doing clean-up work.

“It’s different, shooting in 3D,” Bay says. “You need more cameras. You need different sets. It needs to be a forethought. Right now, studios are treating it as an afterthought.” Directors also need convincing, says he.

Several months before Avatar was released Cameron had invited Bay to the Avatar set. Shot primarily with computer-generated backdrops, the set consisted of bare walls, green screens and rows of computers. “I first thought, ‘This is a fad. And a pain in the ass,’” Bay says.

Then he began shooting the third Transformers film in 3D, with a reported budget north of $200 million. “It isn’t cheap, but it shouldn’t be,” Bay says. “What I love is you really can create new worlds. But you have to commit to it. Fans are right to be more sceptical of it now.”

It’s not just fans. Some theatre owners, particularly those who run independent chains, balk at the idea of renovating in this economy. Most 3D screens include stadium seating and digital projectors, which alone routinely run more than $100,000 apiece.

“I think down the road, we’ll do it because everyone else will,” says Ernest Reyes, manager of two Star theatres in El Paso County, Texas. “But it’s not cheap, and you want to know this investment is worth the time and money.”

It’s a far cry from the exotic popcorn and plush seats of a few years go, Bock says.

“There’s a lot riding on what happens next with 3D. Whether they want to be or not, the movie industry is all in on this one.”