Makers of digital movie equipment are forecasting a surge in sales as Chinese and European cinemas upgrade to tap the popularity of 3D movies such as Avatar.
Sales at Christie Digital Systems USA, the world's largest maker of digital projectors, may double to US$400 million ($566 million) this year if it can meet demand, said Jack Kline, president of the Cypress, California-based company, a unit of Japan's Ushio.
Kortrijk, Belgium-based Barco NV, the second largest, estimates revenue will climb 50 per cent to US$200 million.
The upgrades in Asia and Europe are part of a worldwide trend in theatre spending. The three largest US chains are outfitting 14,000 screens for digital projection after raising US$660 million.
Cinemas charge more for 3D movies and will benefit from the 19 films scheduled for release this year, up from 14 in 2009, according to researcher Hollywood.com Box-Office. Digital systems also cut costs by eliminating film reels and projectionists.
"We didn't expect China to expand so fast," said Andrew Robinson, managing director at Harkness Screens International, the largest maker of screens for digital cinemas. Closely held Harkness, based in Dublin, sold 500 screens in China last year, Robinson said.
Harkness is running its US factory around the clock, seven days a week, Robinson said in an interview. A second plant in France was running 18 hours a day, he said. The wait for delivery was 10 weeks, up from the usual four, he said.
Like in the US, demand for 3D theatres in China is increasing following the success of James Cameron's Avatar, the highest-grossing movie of all time, said Weng Li, a spokesman for China Film Group, the state-run company that controls most cinemas and film distribution in that nation.
There were about 2000 digital screens in China, including 800 that were equipped to show movies in 3D, Li said. Even small cities in China were installing 3D equipment, he said.
Avatar has generated US$193.6 million in ticket sales in China since its release, the film's second-highest grossing nation behind the US, according to Twentieth Century Fox.
China Film Group was seeking bids to add 500 digital projectors over the next four to six months, said John Wilmers, chief executive officer of Ballantyne Strong, an Omaha, Nebraska-based seller of digital cinema equipment and services. Time Antaeus Media Group, based in China, planned to add 500 to 700, Christie's Kline said.
Ushio was little changed at 1586 ($24) yesterday on the Tokyo Stock Exchange. Barco NV rose 9 cents to €33.38 ($64) on Euronext Brussels. Ballantyne Strong advanced 10 cents to US$5.40 in New York Stock Exchange composite trading.
Rules in China may limit the benefits of 3D popularity. Some 3D movies may never be seen in the country because the Government allows about 20 foreign films to be shown each year, according to the Motion Picture Association of America.
Consumers may also lose enthusiasm for 3D as the format becomes more common, said Matthew Harrigan, an analyst with Wunderlich Securities in Denver. "Do you really need to see Jackass in 3D?" Harrigan said. "It wouldn't surprise me if we had a little bit of a lull at some point."
Cinema chains worldwide will spend about US$1 billion over the next three to four years upgrading screens for digital projection, according to George Hawkey, an analyst at Barclays Capital in New York.
DreamWorks Animation SKG's How to Train Your Dragon opened as the top film at US and Canadian theatres last weekend, posting US$43.3 million in ticket sales. The movie played in 3D at more than half of the 4055 theatres, according to Box Office Mojo, a Sherman Oaks, California-based researcher. It is competing for 3D screens with Alice in Wonderland and Clash of the Titans, which Time Warner is releasing this weekend.