3D Exuberance Tamed by Consumer Confusion, Other Issues, CEA Industry Forum Told

"It’s not all doom and gloom,” Schinasi said, but he cited obstacles, including consumer confusion, lack of interoperable 3D glasses, high prices and lack of programming. The CEA 3D working group is developing a consumer education program, similar to an industry effort on HDTV, to “explain what 3D TV is, what it connects to and what sources can display 3D,” he said. The group is also working on a logo program, he said.

Panelists had different views regarding consumers’ attitudes about prices. Andrew Eisner, director of community and content for online shopping site Retrevo, said research shows that consumers aren’t willing to pay a premium for 3D TVs but will buy when they come down to HDTV price points. Jim Mainard, head of production development for DreamWorks, said consumers are biased toward saying no to higher prices, and early DreamWorks research also indicated that consumers wouldn’t pay extra at theaters for 3D movies. The studio has found instead that “consumers are voting with their pocketbooks and prefer 3D movies to 2D.” He said 70 percent of people seeing DreamWorks movies are choosing the 3D version for an extra $3.50 and customers wait in line for 3D theaters when there’s no line for the same movie “at the 2D theater next door.” According to CEA research, consumers object to the idea of 3D glasses but the objections drop by half after they view 3D demos.

Panelists were divided on whether glasses are an abstract issue. Eisner of Retrevo said consumers are concerned about prescription glasses, designer glasses options, being able to take 3D glasses to friends’ houses and “not having to buy six pairs” for compatibility or for entertaining. “The sooner the better for a standard,” he said. Schinasi of Samsung said consumers have shown acceptance of glasses because of the immersive experience they deliver. Bryan Burns, vice president of strategic business planning at ESPN, said glasses have been a non-issue among sports viewers. When ESPN has demonstrated sporting events on 3D TVs, “people won’t put the glasses down,” he said. “It’s not a deterrent once they try them.” Schinasi said CEA has “strong efforts under way” to create standards for glasses. The group expects gaming to figure prominently in 3D and recently voted to incorporate “dual-view” into the coming standard. Instead of alternating between the left and right eye, glasses will “shutter at the same time open or closed,” allowing a gamer unique views when playing with a friend. “It’s the Holy Grail for shooter games,” he said.

Glasses-free TV isn’t a near-term solution, according to Schinasi, quoting Samsung’s visual display president B.K. Yoon as saying glasses-free 3D is five to 10 years away. Schinasi cited Nintendo’s upcoming 3D gaming device, which will be glasses-free, and other commercial technologies that will hit the market. But Samsung’s position is it will release glasses-free 3D for the big screen when “it’s affordable and doesn’t degrade 2D,” he said. “The majority of content is 2D and consumers don’t want to lose that experience.” Mainard of DreamWorks said autostereoscopic technologies being shown are based on dead-end lenticular and parallax-barrier technologies. Products in the five to 10 year view would use different technologies, he said.

Another threat is “bad 3D” that could taint the image for people seeing 3D for the first time. Burns of ESPN said the network is still learning what works and what doesn’t, adding that live TV -- on which mistakes can’t be fixed -- adds to production challenges. He cited a shot in a recent NCAA football game in which a director used a split screen, “something we've been doing for 50 years.” In 3D, the depth of two cameras “live at that second” were different, he said, producing a jarring effect. “Who ever thought about that before?” Burns said. “It’s not funny, because it turns the consumer off.” On the other side, he cited a play in the Boise State-Virginia Tech game this fall in which a defender reached around a receiver to knock a pass away. “We saw it in a way we've never seen it before,” he said. The fear remains that one shot can turn into bad 3D, Burns said. “When a director has shot something the same way for 20 years, it’s hard to unlearn that in 3D.” The number one rule at DreamWorks is “do no harm to the audience,” Mainard said. Content providers have a responsibility to educate filmmakers and executives and be careful that 3D is premium experience that benefits everyone, he said.

Meanwhile, high unemployment, stagnant wages, seasonal discretionary spending and higher consumer savings rates will continue affecting the CE market the next six months, said Kamalesh Rao, director of economic research for MasterCard Advisors, who presented holiday and forecast data at the CEA Industry Forum. Even if unemployment trends change direction in December, the effects will “hang over consumer spending,” he said. Unemployment and wages have received heavy attention, Kamalesh said, but the personal savings rate will affect retail far more than employment. The rate is 5.8 percent, he said, “and the last time we saw it above 5.5 was 1991.” The shift to savings is a “real reset in consumer behavior,” Kamalesh said, and he doesn’t see it falling below 2 percent. “It’s going to color the retail outlook in consumer spending for very long time,” he said.

CE retailing’s 4.7 percent September growth was “pretty good,” Kamalesh said, compared with retail overall, which inched up 1-2 percent, he said. That momentum is expected to move through the holiday season, driven by seasonal discretionary spending and a two-month coattail effect from Black Friday sales. January, however, remains a critical question mark. In his presentation, Kamalesh said he expected an “extended selling season,” which contradicted CEA forecasts from Tuesday forecasting a precipitous fall-off in CE sales similar to last year’s results. Responding to a question about the discrepancy, Kamalesh conceded that January 2011 “remains a big question mark because of how bad January 2010 was.” The falloff in the month this year may have marked a shift from post-December spending, which traditionally had flowed through Martin Luther King Day, he said. “We're not sure how to deal with January sales,” he said, “because of what happened in 2010."

E-commerce continues to grow at 8 percent, Kamalesh said, “and no sector has been affected more than electronics,” whose share is “well above” other categories’. The shift in how consumers are buying will continue to have implications for prices and how manufacturers market and advertise to consumers, he said. Price points “are moving lower,” in e-commerce, which is seeing “robust sales growth” from the trend, Kamalesh said. “People are willing to buy smaller-ticket” products in e-commerce, he said.

CEA Industry Forum Notebook

The U.S. TV set industry will see “pretty strong price erosion” for the holidays, according to Paul Gagnon, director of North America research for DisplaySearch. He said on a future of TV panel that unit TV shipments for the year will be down slightly. Average selling prices have been relatively steady, he said, as consumers have “remained on the sidelines” anticipating the return of price erosion, leading to excess retail inventory. Fourth-quarter sales could help offset weak growth in TV set sales in early 2010, he said, but future trends are negative. “Harsh ASP erosion rates combined with slower unit growth will lead to flat to down revenues” through the next couple of years, he said. Beyond 2012, the overall revenue picture for North America will start declining on an average basis, he said, leaving the industry with the imperative “to look for that next new feature innovation to reverse or stabilize the trend so we don’t see an overall decline in TV revenues.”