3D Television Reality Check

By James Brumley | March 17, 2010 AAA

The future is now - at least according to Panasonic and Sony. The future, however, may not necessarily be wildly profitable, according to consumers. Investors be warned - the era of 3D televisions is upon us, but the leap of faith the manufacturers are taking based on the technology may not be a lead investors need to follow. At least not yet.
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In The Beginning ...
Last week, Samsung proclaimed victory in the race to produce the first mass-produced, consumer-marketable three-dimensional television set. Not to be outdone - and the timing is either uncanny, or a scrambling response to not lose market share - Panasonic (NYSE:PC) announced the launch of its first 3D TV the next day, which will be sold exclusively through Best Buy (NYSE:BBY). Sony's (NYSE:SNE) is expected to be out sometime in the summer.

Given the success of recent 3D theatrical production "Avatar," plus the buzz we've been hearing about at-home three-dimensional systems for months now, the new availability of such televisions seems like it should be a financial game-changer for the manufacturers, and by extension, for investors.

Before any shareholders start to lick their chops though, you might want to crunch some numbers. See, the manufacturers may be a little too naïve to the discretion and skepticism potential buyers are rightfully carrying around in the back of their heads. There are a handful of reasons why these TV might not fly off the shelves.

Price
The technology scores a 10 out of 10 on the 'cool' scale; the price tag, however, may stifle the buying mood pretty quickly. Samsung's package for a 46 inch TV plus the required Blu-ray player plus a couple sets of 3D glasses will run a shopper about $3,000. Ouch. Panasonic's comparable set-up with a 50-inch TV will hurt about the same, at $2,900.

It's more than a small problem, considering comparably-sized HDTV sets can be found priced under $1,000 now. Granted, a high-end Blu-ray player at a price of $300 and two pairs of the required viewing glasses at $150 each closes the mental gap somewhat, but there's still about $1,400 that the average consumer is going to have a tough time justifying just to face yet another problem: not much content.

Limited Titles
Dreamworks Animation (NYSE:DWA) has the honor of offering the world's first-ever HD 3D movie titles to the consumer market, converting "Monsters vs. Aliens" to a three-dimensional television format. The "Shrek" trilogy is on the way too.

And it's not just movie studios embracing the idea. Walt Disney's (NYSE:DIS) ESPN has already successfully tested the three-dimensional broadcast of a college football game, and intends to broadcast several Word Cup soccer matches in 3D as well.

That broadcast of the football game, however, revealed technical challenges, not to mention the requirement for an entire second camera crew as well as a second announcer crew - cha-ching. Other networks are also going to 'go 3D', so more content will be available. The question remains though: will it be enough, and will anybody really care given the lack of practicality?

As for the movie studios putting more titles into a 3D format, that too is labor intensive, costing even more than HD formats to produce. It was done with "Monsters vs. Aliens" as a marketing and feasibility test. The studios and networks aren't going to pony up to three-dimensionalize everything though. And, it's not clear how much - or if - the average consumer is willing to shell out even more for content just for the 3D effect. (Take a look at 6 Reasons Why Products Fail for reasons why 3D might not pan out.)

Lack of Practicality
The costs and the lack of content aside, there's a third pitfall that Sony, Panasonic, and any other 3D TV maker may not fully appreciate: the sheer lack of practicality of at-home 3D television viewing.

To experience the three-dimensional effect, special glasses must be worn that prevents the user from being able to see anything but the TV screen (which requires they sit directly on front of the TV). That's fine for a couple of hours in a theater when it's "Avatar", but it's apt to be annoying when a viewer is at home, watching a game with friends, eating a snack, and just trying to relax.

Worse, three-dimensional television/movie viewing has been rumored to cause nausea and headaches for some viewers. That's not going to help the marketing message.

Reality Check
There's no doubt the technology is incredible. However, investors that were excited about the upside offered by Panasonic or Sony may want to dial back the euphoria. It could be years before the technology becomes as widely adopted as these companies expect it to be. (For related reading, take a look at DreamWorks 3D Bet Could Be A Winner.)

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