The Problem With 3D TVs Is Not Just Cost

by Anthony John Agnello | July 7, 2011 3:33 am

The Problem With 3D TVs Is Not Just Cost

Sony (NYSE: SNE[1]), Panasonic (NYSE: PC[2]), Toshiba, Samsung, Sharp, and many others were banking on a  sea change in the television industry back in 2005. This was the moment when HDTVs were going to become the norm, with consumers spending thousands on flat panel sets.Then 3D television sales would soon follow, with even bigger price tags.

Six years later, even though all television broadcasts have gone digital, the HDTV revolution has only partially been fulfilled. According to Nielsen’s Cross-Platform Report[3] for the first quarter of 2011, just 66% of American homes use an HD television, with the remainder still using older  TVs. With electronics retailers like Best Buy (NYSE: BBY[4]), Walmart (NYSE: WMT[5]) and others finally bringing HDTV prices into an affordable range for a low-spending consumer populace, that penetration should continue to increase steadily, but the television revolution has hardly jumped right into 3D technology and stratospheric prices.

In fact, almost no one is buying 3D TVs.

The 3D television push has been one of the single worst misjudgments of consumer interest in the business’ history. The aforementioned television manufacturers have all pushed expensive 3D televisions over the past three years, TVs that have been roundly ignored . Earlier this year, a different Nielsen study found that 30% of adults that had seen a 3D television said they were “not at all likely” to buy one[6] in the future.

Even now, as the cost of the average 3D television set is coming down, people simply aren’t interested. Analysis firm Retrevo published a study that found that 47-inch to 50-inch 3DTV sets cost just $400 more than similar HDTVs on average, down from as much as $900 more in 2010. As a report at website Gamasutra[7] said, at this rate of decline, 3DTVs will cost just $150 or $200 more than HDTVs come the holiday season.

Will people bite? When there’s no price premium on a 3D television set, will people opt for that technology rather than an HDTV set?

We’ll see. There is a broadening range of content available for those sets. Sony has been working with the BBC to broadcast the final and semi-final matches at this year’s Wimbledon in 3D. The technology is also improving. One of the biggest hurdles between consumers and 3DTV adoption is the high cost of additional 3D glasses, which can cost in excess of $150 per pair.

LG Electronics announced on Friday that it is releasing a new 46-inch set that offers a flicker-free picture that is brighter thanks to new lightweight, easy to manufacture glasses that don’t require shutters to produce a 3D effect. Sony is also trying to take down the cost barrier. It is releasing a 24-inch set this holiday branded with its Playstation video game name. The set will cost just $499 and spare sets of glasses will run $70.

Content and lower cost simply may not be enough. The truth of the matter is that the average consumer simple doesn’t care about 3D. DreamWorks Animation, the studio behind films like Kung Fu Panda 2, described the decline in consumer interest in 3D movies “heartbreaking” in a Jun. 9 interview with The Hollywood Reporter[8].

It’s more than just the television business. The film and television entertainment industries, the video game industry, and the television manufacturing industry need to wake up and face facts: 3D is not, and will never be, the money maker they want it to be.

As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello[9] and become a fan of InvestorPlace on Facebook.[10]

Endnotes:
  1. SNE: http://studio-5.financialcontent.com/investplace/quote?Symbol=SNE
  2. PC: http://studio-5.financialcontent.com/investplace/quote?Symbol=PC
  3. Nielsen’s Cross-Platform Report: http://www.nielsen.com/us/en/insights/reports-downloads/2011/cross-platform-report-q1-2011.html
  4. BBY: http://studio-5.financialcontent.com/investplace/quote?Symbol=BBY
  5. WMT: http://studio-5.financialcontent.com/investplace/quote?Symbol=WMT
  6. 30% of adults that had seen a 3D television said they were “not at all likely” to buy one: http://investorplace.com/28203/sony-keeps-banging-head-against-3-d-tv-wall/
  7. Gamasutra: http://www.gamasutra.com/view/news/35549/Analysis_Price_Premium_On_3DTVs_Coming_Down_Fast.php
  8. The Hollywood Reporter: http://www.hollywoodreporter.com/news/jeffrey-katzenberg-why-hollywood-is-196616
  9. @ajohnagnello: http://twitter.com/#%21/ajohnagnello
  10. InvestorPlace on Facebook.: http://www.facebook.com/pages/InvestorPlace/178906405484848

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