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Sony Fights With Cinemas Over 3-D Glasses As Debut Nears

Sony Corp. (SNE)’s film unit and theater executives are in discussions to resolve the dispute over 3-D showings of the movie, scheduled to open on May 25, according to a person with knowledge of the situation who requested anonymity because the talks are private. In recent weeks executives from Regal Entertainment Group (RGC), the largest chain, and Cinemark Holdings Inc. (CNK), the third biggest, have said they won’t give in.

“So far as I know, nothing has changed,” since the comments, John Fithian, president of the National Association of Theatre Owners, said in an interview.

The conflict began in September, when Sony said it would stop paying for glasses, starting with “Men in Black.” When 3- D arrived, major cinemas agreed to pay a 50-cent per ticket fee to RealD Inc. (RLD), their technology supplier, while studios would foot the 40-cent tab for glasses, said Eric Wold, a B. Riley & Co. analyst in San Francisco. Now, Sony wants theaters to pay both.

“Men in Black 3,” is a revival of the science-fiction comedy series starring Will Smith and Tommy Lee Jones as special agents charged with managing Earth’s secret alien population. Another big Sony 3-D release, “The Amazing Spider-Man,” is scheduled for release on July 3.

Profit Hit

The showdown highlights tension between cinemas and studios as online viewing has become popular. With a drop in DVD sales hurting studio profits, for example, film distributors have sought to limit the time movies spend in theaters so they can be sold earlier on the home-video market.

In the current dispute, bearing the cost of glasses would erode the added profit cinema chains get from the higher prices charged for 3-D showings.

“The exhibitors are saying they already are paying their share,” Wold said. “If the cinemas won’t pay for these glasses, the exhibitors won’t show the films in 3-D.”

Executives at Sony, Beverly Hills, California-based RealD, Plano, Texas-based Cinemark, the third-largest theater chain, and Carmike Cinemas Inc. (CKEC) declined to comment. Regal, based in Knoxville, Tennessee, and Kansas City, Missouri-based AMC Entertainment Inc. (AMC), the No. 2 U.S. cinema chain, didn’t return calls seeking comment.

‘Established Model’

“We have an established business model today, where we pay a piece of our ticket price to RealD as a fee for equipment, and the studios have paid for the 3-D glasses,” Regal Chief Executive Officer Amy Miles said on a March 15 conference call. The company won’t accept any plan that asks Regal to pay more for 3-D movies, she said.

Cinemark CEO Timothy Warner reiterated his opposition to any change on a May 7 call. “I don’t see the model changing,” he said in response to a question.

In a similar showdown three years ago, News Corp. (NWSA)’s Twentieth Century Fox relented and paid for glasses, Wold said in a May 14 note. Fox attempted to pass the cost of glasses on to exhibitors with the release of “Ice Age: Dawn of the Dinosaurs” before backing down as the release date neared. Wold predicted a similar outcome for “Men in Black 3.”

Studios never agreed to bear the cost of 3-D glasses indefinitely, Steve Elzer, a spokesman for Culver City, California-based Sony Pictures, said in September. The need for a new system has been a topic of discussion within the industry for some time, he said then.

U.S. shares of Tokyo-based Sony Corp. (6758) fell 2.1 percent to $13.94 at 10:13 a.m. in New York. The stock had declined 21 percent this year before today.

In most U.S. cinemas, glasses are provided by RealD, the leading maker of 3-D projection equipment. Studios and cinemas split the premium for 3-D screenings, which averages about $3 a ticket, Wold said.

“Either Sony needs to continue to pay for the glasses as every other studio is doing, or just choose not to make movies in 3-D,” Wold said.


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