Our take...
Regal had previously stated that it would wait for DCIP to conclude its financial arrangement before announcing any 3D commitments, but in turn the new deal could spur on conclusion of the deal. Once the DCIP model is finalised, Regal could start conversion at (previously announced) rate of about 200 screens per month. There are now just 10 months before the release of Dreamworks Animation's first 3D effort, Monsters vs Aliens in March 2009 and assuming roll-out began next month, this would give Regal, around 2,000 basic d-cinema screens of which an unspecified proportion would be 3D-enabled by this calendar benchmark. This scenario would be on top of the 134 3D screens Regal had deployed at end first quarter 2008.
While we do not believe that 3D's incremental production costs, are a substantial issue for the US Studios, a slower take up then the 4,170 digital 3D screens we are predicting in the US market by end 2009, could result in a reduction of the premium revenues attainable from 3D screens or a further rescheduling of titles. The deal has been reported on a revenue-sharing basis with RealD, whereby initial capital costs are lowered or removed, in return for a share of premium revenues. In this respect, maintaining higher ticket pricing for 3D screenings will be essential to this arrangement. There are currently around 15 titles scheduled for release in 2009, with many other potential releases without a fixed schedule so far, including the recently announced conversion of classic horror title Dawn of the Dead in 3D, by 3D firm, In-Three.