Are We Putting the 3-D Cart Before the Horse?

Heading into the Consumer Electronics Show in Las Vegas next month, it’s already clear that the big story in the home entertainment sector will be 3-D. There will be countless 3DTVs on display, 3-D Blu-ray prototypes, dueling 3-D eyewear demos, and hoopla from at least three different 3-D consortia. What attendees won’t see, however, is a lot of 3-D programming, and therein lies the rub.

For all the buzz surrounding “Avatar” and other recent big-screen 3-D releases the amount of content actually being shot in 3-D remains minuscule. According to the 3D@Home Consortium, some 160 3-D movies have been released in theaters in this decade, more than in any previous decade, including the “golden age” of 3-D cinema in the 1950s. But for most consumers, movies make up only a tiny slice of their total TV use. The overwhelming majority of TV viewing time is spent watching ordinary TV fare, none of which is currently being produced in 3D.

Hardware makers and technology providers are placing huge bets that enthusiasm for 3-D movies in the theater will translate into demand for 3-D in the home. Sony is boldly predicting that as many as half the TV sets it sells in its 2012 fiscal year will be 3-D capable. Research analysts, including GigaOM Pro partner Alfred Poor, are issuing bullish forecasts for consumer adoption of 3-D technology. But few seem to be stopping to consider what consumers will watch on all those hypothetical new 3DTVs, apart from a few movies, or whether consumers will be willing to pay more for hardware to watch such a limited amount of content in 3-D.

The problem is really twofold: Consumers have just come through a upgrade cycle in their home entertainment systems, moving from standard to high def. Many of them spent $1,000 or more to make the switch. How realistic is it to expect that any significant number will be back in the market for a 3-D set over the next decade? It’s true that the HD upgrade cycle is not yet complete; HD sets make up only about half the TV sets in the U.S., according to some analysts, suggesting there’s a lot of upgrading yet to do. Yet those consumers who still haven’t taken the HD plunge are self-evidently less motivated by technology than others, so how likely are they to spend extra for a 3D-capable set?

For consumers to take another expensive plunge, there’s going to need to be a lot of compelling programming available for them to watch. But it’s hard to see where that content is going to come from. It’s certainly not going to come from the TV networks, which produce the vast bulk of what consumers actually use their TVs for. Producing in 3-D is expensive, and apart from a few filmmakers working with big studio budgets, few content creators today are likely to see the added expense as a worthwhile investment.

The TV networks are doing all they can these days to keep programming costs down, in fact, loading their schedules with relatively cheap-to-produce reality shows as they battle shrinking ad revenue. They’re not about to get into producing shows in 3-D unless there’s some very obvious roadmap for how the added expense will be paid for, which at the moment does not exist.

The best hope for consumer adoption of 3-D, in fact, as Kris Tuttle and Steve Waite point out in their report for GigaOm Pro, 3D Computing: From Digital Cinema to GPUs, likely lies in the gradual spread of 3-D technology and interfaces in computing and videogames, as well as on the Internet, not through the TV and traditional TV programming.

Bottom line? Consumers may tell survey takers they want their 3DTVs. But wanting them is not the same as being willing to pay for them.

Question of the week

Would you buy a 3-D TV just to watch movies?
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Paul Sweeting

Principal Concurrent Media Strategies

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8 Comments Subscribers to comment

  1. One of Alfred’s foundational assumptions is that, over time (within 2-4 years), 3D becomes a feature-set on HDTVs, that is available in a few years without a huge price delta.

    Assuming this is true, the question becomes is are consumers willing to pay, say, a small premium to future-proof for new viewing experiences such as 3D?

    Chances are, most consumers won’t use 3D in the next few years, but many will buy a 3D TV with the expectation they will eventually.

  2. I think one of the key drivers that is missing is gaming. In fact I predict that 3D TV adoption will be driven by the following 3 in order of demand:

    1 – Gaming (nex-gen consoles, PS4, XBox3D, Wii3D)
    2 – Blue-ray and digital downloads of 3D movies
    3 – 3D shows via (DirectTV, Digital Cable)

    I see ESPN and Discovery Channel using it to revive a lot of traffic back to them for sports and nature vs reality based shows. 3D dinos anyone?

  3. It’s true that putting the precise slope on the line of 3DTV adoption is impossible there are a few points I’d add here.

    1. Some compelling 3D content may be enough to spur consumer interest and demand. Consumers reacted to some stunning early HD content by buying expensive new TVs even though most programming was not in HD yet.

    2. Consumers tend to add rather than replace TVs in their home. In the U.S. there are about 2.5 TVs per household and well more 50% of homes have more than 3. In an upper middle class or affluent household the number can easily reach 5 or 6. So existing units are likely to migrate to other locations in the home if a new 3D capable TV is purchased. (Above Michael points out that many consumers will already be interested in “future proofing” their next major TV purchase to support 3D.)

    So many factors including discretionary income are going to come into play here but with expanding content (some of which will be compelling) and falling prices will drive adoption. For better or worse consumers, particularly in the US, seem to find new entertainment options hard to resist. A few incentives and available credit allow them to “scratch that itch.”

  4. I think any discussion of 3D in the home has to include mobile devices. We are seeing innovations in software that allow 3D viewing over smart phones without the need for special glasses or autostereoscopic displays (e.g. 2D-3D Video’s free iTunes app). Also, 2D-3D Video has developed software to convert 2D video into 3D and such an application could easily migrate to the Cloud to produce real time 3D video conversion. I think one of the key innovations for 3D in the home will be TV internet connectiviity and that is coming. There will be widgets developed that will allow for 3D viewing over ordinary HDTVs. The technology for such viewing is available today and all it requires is a TV with an internet connection. I think a richer way to view what is going on with 3D is to view it as part of a much greater convergence between the real world and virtual worlds. As this convergence continues and gathers momentum, we are likely to see consumers demanding more immersive environments whether in the home, at work, at the cinema, or on the road.

  5. In 3DTV, content is king. Hardware always leads software in development, and the stereoscopic TV for the home is no exception. The point about how few 3D movies are released a year is important, but the wildcard here is in the extraction of depth content from the existing 2D back catalog of movies and TV episodes.

    Several companies are well on the way to creating automated systems to accomplish this, and I expect that by 2012 or 2013, we’ll have the critical mass required to make it worth having a 3D-capable set.

    Early adopters will snap up the relatively few sets shipped in 2010, and from then on, acceptance will rise as the content availability increases.

  6. Fair points all. I certainly wouldn’t argue that there will be no consumer adoption of 3D, especially over, say, a 5-year time horizon and given a small enough pricing delta. I merely meant to suggest that TV set makers are kidding themselves if they think we’re on the cusp of another major upgrade cycle comparable to what happened with HD, as some (I’m looking at you Sony) appear to be assuming.

    For one thing, the HD upgrade cycle was co-terminus with the DTV transition, which had the force of a Congressional mandate behind it and yet still took longer than anticipated and remains incomplete. A 3D upgrade cycle will have to generate its own momentum. More importantly, the DTV/HD transition began with a single, defined standard, something 3D cannot yet boast of, the recently announced Blu-ray 3D spec notwithstanding.

    For another thing, the bulk of consumers who spent $1,500 for a big screen TV (that happened to be HD) are still paying it off. So to Kris’ second point, whether 3D penetration is additive or a replacement, I just don’t see most of those households in the market again for some time, especially given current trends in disposable income.

    Absolutely gaming and 3D Blu-ray for the handful of 3D theatrical releases that come out each year will generate niche market demand for 3D-capable displays, and set makers ought to look to capitalize on it. But the data to support a prediction of broader near-term consumer adoption is weak and much of it speculative. Where are the data suggesting that the broad mass of consumers are keen to turn TV viewing–historically a rather low-engagement activity–into something as immersive and disruptive as 3D? Yes, HD is more immersive than SD, and big screens more so than small screens. But you don’t have to put on special glasses and cut yourself off from other activities to immerse yourself in the big screen HD experience.

    I understand set-makers’ motivation in pushing 3D. The bottom is out of flat-panel pricing and they are desperate to restore some margin to their business. But absent anything else, their desperation does not make a compelling consumer proposition. If I ran the zoo, I’d push connectivity and interactivity, which I think aligns more precisely with consumers’ historical embrace of technologies that provide them more control over their viewing, more than 3D, which at the moment is a less compelling proposition.

  7. I find the approach of the consumer electronics companies to be fairly outdated which makes some near-term disappointment with 3D TV uptake possible. However as many big dumb companies do they may play with the numbers to hide their ineptitude. For example they are certainly likely to sell far more “3D capable” units even if the consumers are simply buying a new HD set to watch 2D content.

    So far the consumer electronics seem not to “get” what is happening in the their industry. They are more in a units and feature/price game rather than seeing the expanding role of digital content and interactivity in their domain. The IT companies that play in this space (like Apple, HP and Cisco) seem to be far better positioned long-term.

    The consumer electronics companies may make all the “glass” given their scale but that confines them to a commodity business.

    I think we are all in agreement that the “action” in 3D is going to be closer to the content. That’s certainly where we are spending most of our research cycles these days.

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