[by Pamela McClintock, The Hollywood Reporter]

There has been an alarming dip in 3D grosses at the domestic box office this summer. The trouble started with Disney’s Pirates of the Caribbean: On Stranger Tides: For the first time, a majority of the audience opted to see a studio 3D pic in 2D. It happened again a week later with DreamWorks Animation’s Kung Fu Panda 2. Without naming names, DWA chief Jeffrey Katzenberg, 60, says too many 3D movies from other companies have been more show than substance, betraying the consumer. The early ambassador for 3D opens up to The Hollywood Reporterabout his concerns and why he remains committed to the technology.

The Hollywood Reporter: Why do you think the number of moviegoers seeing films in 3D is declining rapidly in the U.S.?

Jeffrey Katzenberg: I think 3D is right smack in the middle of its terrible twos. We have disappointed our audience multiple times now, and because of that I think there is genuine distrust — whereas a year and a half ago, there was genuine excitement, enthusiasm and reward for the first group of 3D films that actually delivered a quality experience. Now that’s been seriously undermined. It’s not in any fashion, shape or form the demise of 3D, but until there are 3D experiences that exceed people’s expectations, it’s going to stay challenged. (He predicts Michael Bay’s Transformers: Dark of the Moon will exceed expectations.) It’s really heartbreaking to see what has been the single greatest opportunity that has happened to the film business in over a decade being harmed. The audience has spoken, and they have spoken really loudly.

THR: Do 3D tickets cost too much, especially for families?

Katzenberg: Here’s the thing: We are giving our audience a choice. We didn’t take a plane and convert it to all first class. To people who say there is price pressure, or price sensitivity, even in the family market, I say, “OK, that’s why we have continued to support a 2D format and made sure that the 2D movie we’re delivering today is better than the movie we delivered two years or three years ago.” Quite frankly, there’s no industry in the world that doesn’t attempt to move up the customer to a premium experience. I don’t care whether you make shoes or wine or iced tea or cars, everybody tries to create multiple price points. So why shouldn’t we be in the same business of offering our customers a premium experience at a premium price — as long as we deliver them a premium value? If we cheat them, which is what has happened now too many times, then they’ll walk away from it.

THR: Does international box office make up for the soft 3D market in the U.S.?

Katzenberg: There is unprecedented growth going on. Here’s a staggering statistic: We opened Kung Fu Panda 2 in 5,500 theaters, 4,000 of which were 3D. So in China, we had more 3D theaters than we had in North America. In international markets, 65 percent of the gross, or more, is coming from 3D screens.

THR: Do you have any plans to change your 3D strategy at DreamWorks Animation?

Katzenberg: We’re not the problem. We have made five films now in 3D and have built this amazing reservoir of knowledge and tools. Nobody else has made five 3D movies back to back. You can see the quality of the experience increasing with every film. The cost has gone down significantly for us the last three years, and there is still meaningful, incremental profit to us, even though the size of our audience has narrowed. On every account for us, 3D is a win. It’s not nearly as big a win as it should be, and it’s certainly not the win it was headed toward being, and that’s really heartbreaking to me because we have managed to snatch defeat out of the jaws of victory as only Hollywood can do.

‘Kung Fu Panda 2’ Lands in Taormina

With key foreign markets still to open, Katzenberg is touring Europe in early June to promoteKung Fu Panda 2, including a stop in London with Panda voice star Jack Black in tow. On June 11, Katzenberg will be at the Taormina Film Fest in Sicily, where Panda 2 is the event’s opening-night film. Katzenberg also will accept, on behalf of DreamWorks Animation, The Hollywood Reporter Award for Cinematic Excellence at the fest’s Teatro Antico.