A rising tide lifts all boats. That scenario is not happening with RealD (NYSE:RLD). When Twenty-First Century Fox Inc (NASDAQ:FOX) released the movie Avatar in 2009, the majority of moviegoers watched that movie in 3-D. Avatar's domestic 3-D box office revenue represented 81% of total domestic box office revenue. Since then, theaters have installed more 3-D screens, so there are now more places to watch a 3-D movie than in 2009.
However, U.S. consumers' attraction toward 3-D films has declined drastically. Recently, RealD has mentioned that domestic 3-D box revenue is only around 30% of the total box office compared to 70% in 2010. As consumers' attraction toward 3-D films is declining, RealD stock price is also declining.
International expansion As domestic consumers' craze for 3-D declines, emerging market's appetite for 3-D is on the rise. In countries like Russia and China, consumers don't mind paying a premium for 3-D movies. So in emerging markets, movie exhibitors are expanding to 3-D screens. RealD is rapidly installing 3-D screens in those countries.
In many of these markets, the company is replacing existing competitors' 3-D projectors with its own projectors. According to the company, its display has a better brightness. For example, RealD announced it would be installing 700 screens in Mexico for Cinemax. Of that 700, it is replacing 540 competitors' screens. While I can't guarantee when the next movie like Avatar will be, taking market share is a good sign for any company.
China is a big 3-D market for RealD. Some of the local movies are being made in 3-D, and one is the highest grossing movie of the year in China. This quarter, the company also announced it is entering India and installing around 500 screens. India's movie market is big, and if local 3-D movies are made successfully, the opportunity is huge.