Cost Constraints Seen Plaguing Crucial 3D Content Development and Distribution

LOS ANGELES -- IMS Research, which hosted the Television 3.0 conference this week, predicts that by 2014 40 percent of U.S. households will have a 3D TV and worldwide penetration will be nine percent. To get there, though, someone will have to find a way to make 3D TV pay off, it said.

As the industry looks for ways to increase the amount of 3D content available to consumers, cost and quality remain opposing forces dividing the production and distribution sides of the business. Speakers on a 3D content panel at the conference Tuesday debated issues plaguing the content deficiency including high costs of 3D production, inability to draw in advertising support and transmission compromises that have to be made to deliver 3D using existing bandwidth.

The crux of the issue “is not just money” but a missing model to get 3D “to the mass-market,” said Jon Shapiro, founding partner of 3ality Digital. At the same time, Shapiro said, the “big mistake with HD was that it became a free add-on.” For 3D to be profitable for everyone in the chain, consumers have to perceive that 3D delivers value, he said. “If you asked people in the TV business what they'd have done differently with HD,” he said, “they'd say make more use of premium a paid experience.” He noted that consumers are showing a willingness to spend more on a movie ticket to see 3D, and the industry needs to translate that perceived value to home viewing.

According to CBS Vision, 80 percent of movie revenue for 2010 will be generated by 3D, but consumers aren’t being sold on the 3D experience at home, said John Rubey, president of AEG Network Live. Rubey visited retail stores on Black Friday and observed that the content was all animation with no compelling content to appeal to adults. “It comes down to how much content is available on screen,” regardless of whether it’s 720p or 1080p, he said. “Bless ESPN for putting that channel up, but there’s only one” ESPN 3D live game per week, he said. “We have to work at showing people what they're missing."

Panelists disagreed about quality requirements to sell 3D in the home. Joe LoGrasso, vice president and general manager of T-VIPS America, warned that distributing inferior 3D to save costs “could contribute to the early demise of 3D.” He said keeping 3D programming as close as possible to the acquisition format all the way through to the viewer “is crucial.” If the industry doesn’t follow that path, he said, 3D will become the property of “specialty vendors."

According to Ethan Schur, chief marketing officer of TDVision Systems, the goal for 3D is full 1080p/60 HD to each eye but that’s not realistic given bandwidth constraints. At best, he said, viewers should be seeing 1080p/24 per eye “or even 720p/60,” but resolution in many instances is “more like 640 x 720,” he said. Interpolation effectively is generating half of the information “out of nothing,” he said, “and not what the creators intended.” Schur conceded that compromises have to be made in the early stages of 3D to get more content out, but said quality has to be handled carefully. Citing some side-by-side transmissions, he said, “They have to compensate for the fact that you're missing half the pixels.” Grass on a football field or golf course, as a result, would “end up looking like a carpet if they didn’t boost the bitrate,” he said. That can require more bandwidth -- as much as 10-50 percent for half resolution, he said. “You have to boost quantization values because you've lost all your high spatial frequencies,” he said, “so things like grass in golfing are gone."

Part of the cost problem, Schur said, is that the industry is constrained by the business model of the set-top box. He said that precludes regular TV programming from being shot in 3D. Over the top boxes and competition from Boxee and Roku are putting pressure on the cable and satellite industries, he said. “We can’t say we need an inferior format because we're constrained by lack of innovation in set-top boxes due to that business model,” he said. A studio shooting a popular show should be able to record material for 2D and 3D TVs from the same content, he said, comparing the scenario to the days of black-and-white and color TV. Viewers with 3D TVs would see content in 3D and other viewers would see 2D. Now, he said, with viewers seeing basically “NTSC per eye and maybe a little higher, it’s simply not a compelling experience."

Whether increased bandwidth would be required and whether consumers would be willing to pay for increased bandwidth to ensure high-quality 3D is a big question mark. Schur said it’s possible to have full HD 3D and ensure backward compatibility by “playing with knobs and cranking up encoding bit rate and values” in a responsible way. But right now, he said, “we can’t monetize 3D users.” There’s a huge 2D installed base “and they need to be serviced as well,” he said.

Shapiro of 3ality, who’s working on a technical solution to convert 2D library movies to 3D, said quality “doesn’t matter right now” while the market is being seeded. “Joe America,” he said, isn’t going to try to figure out whether a program is half or full resolution. He compared the situation to the early days of HD when consumers didn’t know the bit rates of HD signals they received but were glad to have content at all. “The content has to be quality,” he said, but doesn’t have to cost “a fortune.” Events are fine, he said, but “the bigger thing is to deliver more content so the consumer is comfortable that 3D’s not a flash in the pan or a gimmick.”

Getting consumers to buy 3D TV is the first step to ensure 3D’s longevity, Shapiro said. Quality 3D productions will entice consumers to invest in displays and to subscribe to a tiered package “where they're paying a little more a month,” he said. He said passive-eyewear TVs due out in spring 2011, which sources say will come from LG and Vizio, should help reduce resistance to 3D on that front because of more-comfortable and less-expensive glasses. The looming question, he said, “is how to pay for it.” He said content producers will have to be more creative in how they shoot 3D and that it’s not necessary to have as many 3D cameras for a production as 2D cameras. “3D is exotic,” he said, but it’s a completely different medium where “less is more.” In many cases, he said, “you can get away with less shooting and edits."

Rubey of AEG Network Live said his company evaluates content before determining whether it’s viable for a 3D production. The company has shot 60 live concerts in 3D, he said, adding that the revenue potential to be gained is far greater over time and the company is taking a “marathon” view of 3D. “If it’s more than a 50 percent premium from 2D to 3D, then we want to scrub the numbers very carefully to understand where that money is coming back,” he said.

Advertisers thus far have been reluctant to support 3D because of limited TV sales and programming. Darryl Marks, consultant with CCL Management, said while studios want advertisers to throw their support behind 3D, advertisers want to see more viewers, not just the same viewers watching on higher end TVs. Content providers and broadcasters are also looking to CE manufacturers for sponsorships.

Shapiro has been sitting on U23D since its theatrical release in 2008 where it showed exclusively in IMAX 3D and digital 3D theaters worldwide. He said 3ality won’t release the version for the home market until it has a promotional partnership with a CE company “because it doesn’t move the needle to put something out that only a couple of tens of thousands of people will be interested in.” He suggested such content would incentivize consumers to buy TVs to get programming they couldn’t see otherwise and would help manufacturers distinguish their brands. Going into stores now, consumers see five or six brands with 3D TV “and they all look pretty good,” he said. “You need something to make someone decide on your brand.” Current exclusive bundling deals in place from Samsung and Panasonic are a good thing, he said. For consumers waiting for content, he said, exclusive partnerships “aren’t always fair but they're good for business.”