Can 3D producers capitalise on China’s demand for 3D?

To launch this week’s Focus on China 3D series, we talk to Wilhelm F. Mittrich, CEO of 2D to conversion company imcube and influential Chinese director Bai Qiang to investigate how the west can capatilise on the demand for 3D entertainment in China.

Wilhelm F. Mittrich is the CEO of imcube 3D Solutions Limited, Hongkong and spends a lot of time in Beijing. He has close contacts with the Chinese televsion and movie industry and will soon be talking about the growth of the Chinese 3D market at the 3D Innovation Day in Berlin.

Bai Qiang is the producer of the very first 3D concert movie of mainland China called Transcendence and was interviewed by 3D Focus recently. He and his select team have accumulated lots of connections with Chinese government and related business entities.

 

<>

3D Focus: Why do think China is already the biggest market for 3D entertainment?

Wilhelm F. Mittrich: There are three cumulative economic trends from which 3D is benefitting in China:

Firstly is the “Middle Class Development“ as the dominant economic factor. The UN estimates that, by 2030, the size of the middle class in China will be four times larger than the one in the US. This goes together with the urbanisation of China. Presently, China has over 170 cities with a population of over one million and this number is expected to grow to over 220 within the next twenty years. This growth of the middle class and the corresponding growth of disposable family income means that all leisure activities, such as cinema, television and the Internet, are booming. 

Secondly it is the "Culture as a Business". In its 12th 5-year plan (2012 to 2016) the Chinese government has not only put emphasis on the economic development of the domestic market in general, but on the development of “Culture as a Business“ in particular. As a consequence, a lot of commercial activities in the cultural sector – government supported and private – have taken place recently. The intention behind this is to position China as an exporter of culture and the government knows that this can only take place when a quality market is developing domestically which supports talent and raises the professional standards to an international level.

Thirdly it is China’s intention to replace Korea as the world‘s dominant supplier of television displays. As Korea has replaced Japan for flat panel displays years ago, China’s intention is to become the worlds leading supplier in 3D and Smart TVs. The 500 million traditional TV sets which need replacement in China’s households are a strong basis to build on.

3D Focus: What have imcube Labs been doing in China?

Wilhelm F. Mittrich: imcube labs has been present in Beijing for some time now with a focus on introducing 3D related technologies and services to the Chinese market. This has resulted in the opening of a 3D conversion facility from which imcube is offering 2D to stereoscopic 3D conversion services based on imcube’s proprietary and patented technology. We are also representing various European software and hardware technologies for which the Chinese market presents great opportunities. All our initiatives our centered around combining European quality with the potential of the Chinese film and trans-media market.

3D Focus: Is China your most profitable 3D market?

Wilhelm F. Mittrich: To be honest, we currently see more challenges than profits. Whoever is attracted by the huge numbers of everything China seems to offer will learn fast that translating this into quick profits will lead to disappointment. We are still at the stage of learning and adapting. But we are not only finding obstacles but also pleasant surprises. One of these is the quality of artists which we have trained on post-production work like roto-scoping, painting and compositing / conversion. Whilst this work has traditionally been outsourced from Hollywood to India, we have found very talented, eager and reliable college graduates for this work, even in remote cities in China and the trainers we sent there from L.A. and Berlin had only good things to say about how quickly these students could be brought to an international quality level.

3D Focus: Is it film or television that represents the biggest opportunity for 3D stakeholders in China?
 
Bai Qiang: Definitely from films in the coming years. The market in China follows the same trend we see in the rest of the world: 3D in cinemas is booming, but 3D in TV is still at its very early stage. But as 3D films are very popular in China, more than in any part of the world, we expect 3D content to appear on television and especially on Internet VoD platforms very soon.

There are more than 6000 3D screens in China already, that is the second most in the world, only behind the US. For IMAX, China is the fastest growing market in the world. A total of 226 IMAX cinemas have been contracted to date out of which 92 are in operation. At the end of last year when the first “big budget” Chinese 3D movie, “Flying Swords of Dragon Gate”, a 3D remake of a 1967 Kungfu Classic, was released, it reaped $100M in box office revenue on an initial production investment of $ 35M and created a new IMAX revenue record of 12 million US dollars in 63 Imax cinemas.

The Chinese release of Titanic 3D generated $20m in the box office weekend – its largest outside the US. The first fully converted Chinese feature film has just hit the cinemas and we expect more to come.  The big news is a film called Painted Skin II: It earned 500 million+ RMB ( +80m US$) in only 11 days, breaking all kinds of records for a domestic movie in China.

Wilhelm F. Mittrich: Dedicated 3D Channels like 3net in the US and Sky 3D in the UK have initially banned converted material as “not the real thing” and somehow inferior to “native 3D”. This has changed as the theatrical film business has proven that conversion – if done properly – can produce the same quality as native 3D and that it is even superior for certain productions. “Transformers 3” would not have been such a big box office hit, had it not been a combination of about 50% native 3D and 50% conversion of shots which could not have been done in native.

In the meantime, both leading 3D channels have officially announced that they will accept up to 25% converted material for their programming.

But here comes the next challenge: Library owners cannot afford the $93,000 per minute it cost James Cameron to convert Titanic. Even the going rate of about $50,000 per minute is far beyond what even a well-known library title could earn back with TV licensing.

And this is in line with the budgets of 3D TV channels, who don’t have the reach to attract advertisers yet which would give them enough revenue to pay high licensing fees.

On the other hand the quality standards of Sky 3D and 3net are extremely high and they don’t make any concessions. As a result, they reject about 90% of all incoming 3D material in the first QC pass, regardless of whether it is produced in-house, commissioned or offered by third parties. It is almost like squaring the circle to find a conversion technology which meets the quality criteria of the 3D networks, but at a price which they and their content licensors can live with. After all, conversion is a manual process done by skilled artists frame-by-frame.

imcube labs has just finalised the tests for what is called “imcube home” and “imcube mobile”, two technologies which combine the work of our skilled artists in China with the experience of our Hollywood partner company Identity FX, which has been responsible for “native 3D optimisation” for such recent 3D box office successes like “Prometheus” and “The Amazing Spiderman”. The amalgamation of imcube’s patented technology, the workflow based on the experience of Hollywood’s leading 3D expert and a large skilled artist base in China has led to a conversion service offer which combines the quality requirements of 3D TV channels with the budget possibilities of library content owners.
 
3D Focus: Given the amount of 3D airtime that needs to filled across the forthcoming 3D channels in China, how will quality match the quantity?
 
Bai Qiang: Well, there is only one 3D channel in China at this moment, though the government has planned to launch 10 3D channels within the next 4 years or so. Definitely there is a huge lack of 3D content, just as in the rest of the world. For 3D films, the Chinese audience is welcoming them so eagerly that they have not paid too much attention to quality. But there has been more and more concerns about quality lately. For 3D TV content, right now there are not many people watching the sole 3D TV channel in China so there is not much feedback at all.

3D Focus: Is it fair to suggest 3D is being pushed onto Chinese consumers by the government and theatres rather than being demanded by Chinese consumers? I understnad that many chains in China only exhibit 3D versions of movies.
 
Bai Qiang: Chinese consumers welcome the 3D movies. Certainly more or less because most of the 3D movies in China are Hollywood movies which are of much better quality in general then domestic Chinese movies. So it is the fact that the audience wants to watch Hollywood movies, 3D or 2D. Many Chinese consumers go to movie theatres as a very ceremonial thing, and therefore they would like to make the experience as unique and remarkable as possible — so they prefer 3D, and that is also one of the reasons for the huge success of IMAX. No question, Chinese consumers welcome 3D. Cinema chains and distribution companies play their role to cater for this demand — and therefore in many cases, they decide to release the 3D version only.

SARFT (State Administration of Radio, Film and Television ) has just released the figures for the first half of 2012, and they are stunning: Box Office was $ 1,26bn, an increase of 45% over last year. And of this 63% has gone to 7 Hollywood studios, mostly for their big 3D productions for which China has eased import restrictions earlier this year.

Both leading Chinese 3D experts will be speaking at the 3D Innovation Day as part of IFA.

<>

FREE WEEKLY 3D NEWS BULLETIN –