3D TV: Not So Fast

Consumers are falling fast for 3D entertainment. For proof, consider the success of Avatar, an otherworldly adventure film full of three-dimensional imagery that in just two weeks has grossed more than $640 million at the box office. In hopes of capitalizing on the public's burgeoning thirst, Hollywood studios are cramming 3D content into more films and TV manufacturers are equipping gear so that it showcases the technology in people's living rooms. But as much as consumers demand 3D in theaters, they may not quickly usher it into their homes. Making a living room theater 3D-capable can cost upwards of $4,000, a hurdle that even the most ardent 3D backers say may slow adoption. "We don't expect to see an explosion of 3D in the home until the 2012 time frame," says Mike Fasulo, chief marketing officer for Sony Electronics, which nevertheless is betting its future on the technology. Sony is among the electronics makers that plan to introduce 3D-friendly TVs and DVD players at the Consumer Electronics Show, due to begin Jan. 7 in Las Vegas. Sony (SNE) expects 3D TVs to account for up to 50% of its total TV shipments in the financial year that ends March 2013, up from zero percent this year. To that end, the company is adding 3D capabilities to content from its movie and television studio, PlayStation 3 video gaming business, and broadcasting equipment arm. Though Panasonic (PC) was one of the biggest early proponents of 3D technology, Sony hopes to claim leadership over its biggest rivals, including Samsung and LG. Early movers typically can charge more for their products before prices inevitably slide. "We're uniquely positioned," Fasulo says. More 3D Entertainment in the WorksSpurred on by the success of films such as Avatar, other Hollywood studios are throwing their weight behind 3D entertainment. All future Disney (DIS) and DreamWorks Animation SKG (DWA) animated titles will be available in 3D, and other filmmakers increasingly are incorporating the technology in movies, concert recordings, and sporting events. Satellite-television provider DirecTV (DTV) plans to introduce a 3D channel in 2010. Widespread support from studios and device makers has prompted the consumer electronics industry to move ahead with unprecedented alacrity in creating standards for delivering 3D content to the home. "In this situation, we've got the creators and device makers both running to market 3D as quickly as possible," Fasulo says. It can take years for players to agree to industrywide standards for cutting-edge technologies. Manufacturers began collaborating on a high-definition video standard in February 2002 before splintering into rival camps. The strife wasn't resolved till February 2008. By contrast, 3D standards were agreed upon in just 18 months. In late December, the Blu-ray Disc Assn. approved protocols for delivering 3D from high-definition discs to HDTVs. "The good news is that by having everyone aligned, we can make this an easy upgrade decision for consumers," says Andy Parsons, chairman of the Blu-ray Disc Assn. Costly Home EquipmentConsumers may not move so quickly in adopting 3D for the home, however. To enjoy the full benefits of 3D technology, consumers need televisions with ultrafast screen refresh rates and new cables that can transport the gigantic 3D files from Blu-ray players to the set. That typically means they'll need both a new Blu-ray player and new big-screen television. And if customers want the surround-sound experience they get in movie theaters, they'll need to purchase a new multimedia receiver, too. Add in special glasses required to view the three-dimensional effects, and the price tag can climb to at least $4,000. That helps explain why few of the other manufacturers placing big 3D bets expect an overnight demand boom. LG predicts it will sell just 400,000 3D TVs in 2010, a fraction of the 25 million high-definition sets it will produce. Panasonic and Samsung are also among manufacturers expected to introduce new 3D sets at CES or soon afterward, but executives at both companies expect only modest sales in 2010. Research firm DisplaySearch forecast the 3D TV market to reach $1.1 billion in 2010 and grow sharply to $15.8 billion by 2015. It's a sizable prize in itself, but manufacturers see other reasons for chasing 3D dreams. The technology can spur sales of big-screen televisions and Blu-ray players. Only about half of U.S. households have purchased their first high-definition TV. And makers of TVs and Blu-ray players are trying to convince consumers who already have a single HDTV set in the home to upgrade to newer, more expensive models. With 3D, consumers will view particular brands as technology standouts. And that, says Sue Shim, Samsung's senior vice-president for sales and marketing, "can lead to selling all kinds of models."

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