In a world where video games are now outselling movies it looks like big studios are going to have get creative in order to win over audiences these days.

Time to Dust Off Those 3D Glasses
One new angle now being pursued involves the revival of a technique that last had its heyday when drive-in theatres, poodle skirts and ducktail haircuts were all the rage: 3D.

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This year a number of big studios including News Corp. (NYSE:NWS) owned Fox Studios, Disney (NYSE:DIS) and DreamWorks Animation (NYSW:DWA) plan to release animated feature films that utilize a new 3D exhibition process pioneered by technology company Real D. The fledgling technology is currently available in just a few hundred digital theatres nationwide, but DreamWorks appears to be so confident that the technology will be a hit that it has committed to make all its movies in 3D starting this year. Viacom (NYSE:VIA) owned Paramount has even stepped in to help subsidize the cost of digital conversion for theatre owners.

DVD Sales Slump May be Permanent
The move could just be what the ailing movie business needs at this point. Despite the fact that large flat panel TV sets are the norm in most American households, DVD sales have slumped during the recession and there are growing fears that secular charges are now underway that spell continued deceleration in sales even after the recession ends.

DreamWorks Could Buck the DVD Sales Slump
While this might be one of the main reasons my many analysts are shunning media stocks. However, despite reporting a huge earnings miss during the fourth quarter, Standard & Poor's nevertheless felt obliged to upgrade DreamWorks to a Buy as it expects the company to generate continued strong DVD sales with its unique family friendly animated offerings. (Learn to set your own expectations, read Do-It-Yourself Analyst Predictions.)

The Bottom Line
Video games have redefined consumer expectations about visual entertainment. Given this paradigm shift, the highly stylized digital offerings from DreamWorks could just provide audiences with enough dazzle to keep them interested. Add a little 3D, and the impact could be even more compelling.

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Tickers in this Article: DWA, DIS, TWX, VIA

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