3D TV: Coming of age in the next five years

Jim O'NeillLast week, Samsung rolled out a 50-inch plasma 3D-ready HDTV set for less than $1,000, which is pretty remarkable when you consider that in 1998, when the first HD set rolled into the market it cost $5,499 and didn't offer the same amount of real estate.

IMS Research is saying that more than 50 broadcasters and pay-TV operators will be offering 3D TV services to homes in the U.S. by the end of this year (see this story), and expect the amount of content to quickly ramp up as penetration increases.

Parks Associates analyst Pietro Macchiarella agrees, and said that, while there are a number of similarities between the launch of HDTV and that of 3D TV, the difference this time around is that everybody in the industry is looking at 3D as a must have. CE companies see it as a way to drive sales of new televisions and 3D-compatible devices; broadcasters, who bridled at the introduction of HD, are jumping into the new technology with both feet, because they see an opportunity to differentiate themselves; and content providers, looking at the successes of movies like "Avatar" last year, see a chance to charge more for content.

"All the stars are in place for this to happen," said Macchiarella.

But there are obstacles, plenty of them.

While consumers are interested, they're not yet truly engaged by the concept of 3D... at least not to the extent that they're willing to junk their old TVs.

"If they're in the market for a new TV, they might buy," he said. "But the lingering effects of the recession is an issue, the lack of content, price of devices, and lack of consumer education about 3D if holding buyers back a little bit."

Lack of hands-on experience is a problem
Part of the industry's challenge, he said, is that consumers just haven't had a chance to get their hands, or their eyes, on functioning 3D technology. Few of their neighbors have bought 3D sets, and most retail outlets are still behind the curve marketing them on their sales floor. Without word-of-mouth and effective retail-side marketing, the chances of moving the new technology slip.

"There's a problem on the marketing side because CE companies have a difficulty in explaining how 3D looks, they have to show consumers what it looks like and until buyers experience it for themselves, they're not going to jump onboard," he said. "I've had people tell me they went into a store to look at 3D televisions and put the 3D glasses on and couldn't see anything because the batteries were dead. There is a problem if the retailers are not showing the product in the right way, there needs to be a major investment in that side of the business."

Even so, research shows the 10 percent of consumers who are aware of the technology are very interested, especially younger buyers. And, if people already in the market have an opportunity to buy a 3D-enabled TV for a similar price as an HDTV or flat-panel TV, they're likely to do so... if the price is right.

"The differential cost to implement this feature is very low, or will be very low the more time passes," said Macchiarella. "If you buy a new TV and the feature only costs you $100 to buy 3DTV, won't you buy it?"

He said that consumers who have had experience with 3D TV are more likely to buy because the perceived benefit is high. "If we experience the technology, we like it," he said.

The technology is catching on, and the challenges are growing
Increasingly, operators and broadcasters are looking to at least experiment with 3D. In Australia and South Korea, multiple broadcasters have launched trials, Sogecable in Spain, Sky in the U.K., Comcast, DirecTV, Cablevision and Verizon in the U.S. all have dabbled. "Cable companies, satellite companies and IPTV companies are all coming on board regardless of their technology," Macchiarella said. And, almost all have gone to sporting events first.

Parks research shows that consumers are most intrigued by the prospect of watching 3D movies (39 percent) and television shows (27 percent); a quarter of them are interested in seeing sports in 3D.

"We think that 3D TV will most likely be more of an appointment-based experience," he said. "And sports is the most natural thing for appointment-based viewing. That's why broadcasters are betting on it to succeed."

Still, Hollywood studios are expected to release about 35 3D movies this year, 100 in 2011, and upwards of 200 in 2012. "The 3D-revenue model is working for movie theaters, they're making a lot of money on 3D," Macchiarella said.

But pay-TV operators face an additional hurdle to making 3D content available to customers: legacy set-top boxes, many of which won't be able to handle 3D.

"This could be an issue because it's not really dependent on the consumer, it's on the provider," Macchiarella said. "I'm not sure if operators are really willing to spend billions of dollars replacing set-top boxes. It may be one of the biggest obstacles, unless they can charge more."

At least one STB provider, Motorola, says it can do some firmware upgrades to their high-end set-top boxes to be 3D capable.

As the popularity of 3D grows, one of the biggest issues facing it will be how advertisers cope with it. Operators today depend on a mix of local and national advertising. The big question is: Will local advertisers be able to broadcast in 3D? If the answer is "no," will consumers take off their glasses to watch local advertising in 2D?

"That's a major problem and I don't think cable companies, for example, want to give up that local revenue," Macchiarella said. Another issue: How advertisers deal with cross-platform campaigns. The best 3D ad is the one you actually produce for 3D, so advertisers will have to dedicate some resources for 3D and do different ads, something that time and available money may make difficult to do.

For online advertisers, the issue becomes even more basic: How to do overlays and pre-roll. "Many times right now, it's just ad networks rolling overlays in front of video, they don't really know if the content is 3D," said Macchiarella. "With overlays, there's still no definite standard on where you put advertising and it might prove very annoying for consumers."

The near future
Two months ago, Parks estimated 10.2 million 3D TVs will be sold in the world this year, a figure Macchiarella acknowledges is a "very optimistic number," but he stands by his projection that 80 percent of the TVs sold in the U.S. by 2014 will be 3D ready.

Already, manufacturers are hitting 3D hard, and the sets they're rolling out are meant to deliver 3D in the nearly larger-than-life experience consumers are looking for; some 90 percent of the 3D models available are 46 inches or larger.

"There's no doubt in my mind," he says. "3D TV is here to stay, and it will be a standard feature in sets being sold" even if not everyone is using--or ready--for the technology. -Jim