A one-dimensional future for 3D

The hype for 3D content and devices pumped up through 2010 has steadily deflated through 2011 as expectations have been punctured by predictable barriers to adoption: screen price, consumer ambivalence about 3D glasses, gimmicky use of 3D by Hollywood studios, and lack of investment in 3D from broadcasters. While consumer electronics vendors have continued to add 3D capabilities to devices, there is little indication that 3D is the killer app motivating consumers to upgrade their TVs, as many vendors would have hoped.

The biggest disappointment for 3D’s backers has been the lacklustre response from content producers, with the exception of some major Hollywood studios (many of which have been criticised for treating 3D as an expensive gimmick, rather than a tool for enhancing storytelling).

Broadcasters still rate 3D as a low priority for investment and attention, with many TV production solution vendors backing away from 3D and focusing on HD, online, social, and smart TV tools.

While it is too early to predict the end for 3D, it is clear that industry attention has shifted back to other key technology and commercial challenges, and the road to mainstream 3D adoption runs directly into persistent headwinds.

3D-capable devices keep hitting the market

The good news for 3D enthusiasts is the continuing efforts by consumer electronics vendors to push 3D capabilities into consumers’ hands. Prices for 3D TVs continue to fall as the capability trickles down from high-end to mid-range screens. Many consumers will buy a 3DTV in the next 12 months by default, as they replace older screens with newer models that have the capability built in, global economic uncertainty notwithstanding. Consumer annoyance with the cost of active shutter glasses and compatibility between different manufacturers remain problematic.

Both LG and HTC now have 3D-capable mobile handsets in the market. Ovum has had the opportunity to test the LG Optimus 3D handset and we were impressed by its autostereoscopic screen, but underwhelmed by the content available. LG has moved to address this by announcing technology that automatically converts OpenGL-based games from 2D to 3D in real-time, meaning developers don’t need to alter their code to enable 3D. This is not enough on its own to convince consumers that 3D is a must-have feature, but it will significantly deepen the pool of game content.

Another autostereoscopic device that relies on games, the Nintendo 3DS, suffered initially from disappointing sales, but it is difficult to pin this sluggish start to customers’ lack of interest in 3D: other factors such as price, continuing availability of older and cheaper Nintendo DS consoles, a lack of blockbuster launch titles, and competition from smartphones in the handheld gaming market contributed. However, recent 30 per cent price cuts have reportedly stimulated demand significantly. Of the current crop, the 3DS is the autostereoscopic device most likely to reach a mass audience, so its success or failure will inevitably be taken as a key indicator of consumer acceptance of this type of display technology.

These second- or third-screen 3D devices form an important part of the 3D value chain, along with 3D-capable consumer video and photo capture equipment (camcorders and compact cameras), allowing consumers to create and view a greater range of 3D content than is available to cinema and home 3DTV audiences. The aim is to get people invested in 3D, in the hope that this will spur them on to purchasing multiple 3D devices to make the most of their content.

But broadcasters aren’t investing

Ovum’s interviews with broadcasters show a clear lack of interest in 3D production and distribution. This is understandable given the still incipient and geographically fragmented installed base of 3D screens, the high cost of 3D production, ongoing rollout of HD, and strategic investment priority being given to online video.

Indeed, the need to transition from linear broadcasting over terrestrial, satellite or cable networks to on-demand, multiscreen, rights-managed Internet video, with all of the attendant changes to production workflows, business models, and revenue streams that this transition entails, is clearly more pressing. Penetration of smartphones, tablets, and PCs is high and growing in almost every market globally, and most owners of these devices expect to be able to watch video on them. The threat to audience share from web video players and illegal content is clear and present. Conversely, 3D remains a niche experience, with many viewers unconvinced of its benefits, so it is little wonder that broadcasters’ focus is elsewhere.

Of the broadcasters and pay-TV providers that are actively distributing 3D video, the most popular genres are animation, live sport, and blockbuster movies. These genres can typically be distributed globally or in multiple geographies, spreading the cost of production across a broader viewer base.

With nobody to sell to, vendors are backing away

Anecdotal reports from the trade show floor at the International Broadcasting Conference (IBC2011) in Amsterdam at the beginning of September indicated a dramatic drop in marketing efforts for 3D production products and services.

This is a real challenge for the consumer electronics vendors that have invested heavily in product development and marketing, in the expectation that content companies would come to the party. With content producers apparently ambivalent about investing in 3D, providers of 3D production tools and services are stuck without a market, and are investing elsewhere themselves. The pipeline of high quality 3D video (whether movies, documentary, sports, or TV programming) doesn’t look like it’s getting any fatter.

Tim Renowden is an analyst in Ovum’s Consumer IT team, based in Melbourne.