3D Film Successes Spark Push to Screens at Home

Chuck Pagano, EVP, technology, ESPN

Chuck Pagano, EVP, technology, ESPN

September 15, 2009 – The 3D phenomenon continues to expand, now reaching into the living room and prompting thoughts of new revenue streams for premium content and HDTV sets.

A year ago discussions centered on whether there was a future for 3D in the home. Today the talk is about how to make it happen against a backdrop of technical unknowns, including absence of standards and uncertainties about how much network bandwidth 3D content will consume.

Box office successes continue to mount, the latest coming with the 3D releases of
animated blockbusters Monsters vs Aliens and Up along with action and horror films that produced outstanding results in comparison to their showings in 2D theaters. Directors James Cameron, Peter Jackson and Steve Spielberg have all committed to producing most, if not all of their future films in 3D.

Some service providers aren’t waiting for all the issues to be resolved before moving to test the waters on the home front. In June, Comcast offered “My Bloody Valentine 3D” on VOD, and sometime next year, British satellite broadcaster BSkyB will launch the U.K.’s first 3D channel. In Canada, Shaw Communications announced plans to launch a 3D VOD service this summer.

There’s a good chance that sporting events increasingly will be available in 3D. Sky’s line-up, for example, will include some sports, and ESPN will broadcast at least one college football game in 3D this season.

Crucial to the marketability of this new viewing experience, of course, is the availability of 3D HDTV sets. Sony, with plans to introduce a 3D liquid-crystal-display TV set by the end of next year, is the latest to join the lineup of major manufacturers on this bandwagon, which also includes LG Electronics, Panasonic and Samsung. Consumers can now purchase sidecar devices that enable later models of HDTV sets to display in 3D.

The potential for more money and market differentiation is a major reason why so many programmers, multichannel providers and manufacturers are pushing ahead with 3D despite all of its technical and marketplace uncertainties. If theatrical runs are any guide, consumers are willing to pay a premium for 3D.

“Theater revenues typically are two-and-a-half to three times the 2D version,” says Peter Fannon, vice president of corporate and government affairs at Panasonic’s North American unit, which will announce its 3D TV and Blu-ray players at CES in January.

But, for service providers and programmers, there’s a lot of guess work to strategic planning for 3D, given the uncertainties associated with the pace of theatrical adaptation, the volume of movie content that will become available in 3D and a variety of technical factors.

On the theatrical front, the revenue gains associated with theatrical displays in 3D have fueled the equipping of digital theaters for display of 3D at an accelerating pace. Out of 38,000 U.S. screens, over 2,300 are now 3D capable, according to the National Association of Theater Owners, and the worldwide total now stands at over 5,000, according to research and consulting firm DIGDIA.

These numbers still represent a small fraction of total screens, but with cost savings associated with digitization of movie distribution driving replacement of projection technology across the industry, the upgrade to 3D seems sure to accelerate as digitization progresses and more 3D films enter the market. According to DIGDIA, there are now 30 studio releases scheduled for 3D showings in 2010, more than double the total for 2009.

The pace of Hollywood’s use of 3D to drive after-market distribution through Blu-ray disc sales will also be a factor in the ramp-up to electronic distribution over service provider networks. By the end of this year, some vendors believe, the Blu-ray community will have finalized standards for 3D discs. The result: MSOs, telco TV providers and satellite operators that don’t launch 3D services next year could be at a competitive disadvantage compared to companies that sell or rent Blu-ray discs, at least among consumers who want 3D.

However, not everyone believes that Blu-ray 3D is just around the corner. “That’s still some distance away,” says Michael Demeyer, head of the consumer product group at Sonic Solutions, which participated in Blu-ray Disc Association meetings on 3D in August. “Different people have different degrees of optimism for when we’re going to see 3D Blu-ray discs.”

Even if the standard were finalized tomorrow, there would still be a limited amount of existing films and other content already shot in 3D – a problem not just for the Blu-ray camp, but for multichannel providers, too.

It’s possible to convert 2D content into 3D, but, as previously reported (see February Source Code, p. 26), the process is time- and capital-intensive because a lot of manual, frame-by-frame intervention is required, resulting in costs in the range of $20,000 to $80,000 per minute,. So to make a business case for conversion, a studio would have to be convinced that it could earn back the cost.

“It’s probably a blockbusters-only thing,” Demeyer observes.

Animation, however, is much easier to convert to 3D. “You can make true 3D out of animation just by cranking it back through the rendering farm,” he says.

Shooting in 3D has its own hurdles, including new cameras, new graphics and a fairly steep learning curve. ESPN, for example, has been testing 3D for about two years and found that some tried-and-true techniques from the 2D world, such as certain camera angles, don’t work as well in 3D.

“We found that the longer lenses aren’t working,” says Kevin Stolworthy, senior vice president for content and IT technology at ESPN. “The typical shots that we do are a lot tougher.”

For at least another few years, the selection of 3D content and equipment will remain limited compared to 2D HD. Add in the limited number of 3D-ready theaters and it’s clear the addressable market over the short term will remain small.

The current economic funk hasn’t helped, either. In fact, Philips shut down its 3D division in March 2009 after deciding that plunging consumer spending meant the timeline for mass adoption “has shifted significantly.”

A lack of standards could also impede roll-outs of 3D to the home.

“A big roadblock to widespread introduction of 3D TV is the inordinately large number of different, competing approaches being investigated and developed,” says Anthony Zecha, director of technology in Verizon’s Corporate Technology group, where his work includes FiOS TV. “This virtually assures that the industry will be undergoing trials for some time and that a comprehensive standard is still years away.”

But some vendors downplay the standards issue, arguing that work by organizations such as MPEG have already tackled key needs such as encoding and decoding.

“Most of that [concern] is unwarranted,” asserts Ajay Luthra, senior director of advanced technology at Motorola. “The only thing right now that isn’t well stabilized is the display. Everything else we can do today.”

On the display side, there are competing ways to handle 3D that are fragmenting the market. HDMI 1.4, the latest version of the High Definition Multimedia Interface, could help as it becomes more widely deployed in set-top boxes and TVs by providing a way for the two devices to negotiate formats.

“It will solve most of those issues because the TV and set-top box will be able to communicate: ‘I can do only side-by-side [format 3D], so send me that,'” Luthra says.

Yet another wild card is bandwidth. Many 3D TV offerings thus far – such as the episode of “Chuck” following this year’s Super Bowl – require the same amount of bandwidth as 2D. The catch is that they’re often criticized – both by people in the industry and average consumers – as having less-than-impressive quality.

More quality requires more bandwidth, but exactly how much depends on the technology, creating more uncertainty in the industry.

“Currently it appears that at the low end, 20-30 percent additional bandwidth is needed, and at the high end, 100 percent additional bandwidth is needed,” says Verizon’s Zecha.

Those estimates are for stereoscopic 3D, which requires special glasses. Autosteroscopic, which doesn’t, could require even more bandwidth, Zecha says.

Autostereoscopic 3D is in limited commercial use today in business applications such as digital signage. It isn’t widely used – or even used at all in the home video market – partly because it requires the user to be in a sweet spot in order to see the 3D image, an impractical requirement for multiple viewers scattered around a living room. Philips’ exit is noteworthy because its autostereoscopic WOWvx technology, which was commercially available, had a sweet spot large enough to accommodate multiple viewers.

So for at least the next several years, 3D TVs likely will remain stereoscopic, where viewers have to wear special glasses to get the 3D effect. Is that a barrier to adoption? No, say companies such as Panasonic, pointing to focus groups and other research.

“Half the population wears glasses anyway, and they take them on and off all the time,” says Panasonic’s Fannon. “We just don’t see them as an impediment.”

Others see them as a short-term barrier to adoption.

“I think it’s going to be a challenge for most consumers to get used to wearing glasses in the home, but I think that will be overcome as a function of time,” says Chuck Pagano, executive vice president for technology at ESPN.

Not all 3D glasses are created alike, imposing yet another barrier to adoption. Most consumers equate 3D with flimsy, ill-fitting, cardboard glasses with colored plastic lenses.

“People think that’s a gimmick, and most of them get turned off because the quality is not very good,” says Motorola’s Luthra. “That gets a bad name associated with 3D.”

Panasonic’s 3D road show, which kicked off this month, features better-quality glasses aimed at providing a better viewing and wearing experience. Glasses also affect 3D’s bandwidth requirements.

“For instance, a full-frame-rate 1080p60 video in 2D can be used to distribute and render a stereoscopic 3D version in 1080i60 format, [with] each alternate field corresponding to either the left or right view,” says Harmonic’s Perrier. “In this case, the 3D version is the same resolution as the 2D, but half the frame rate. It requires expensive shutter glasses that are notorious for giving viewers headache or nausea.

Encoding also affects 3D’s bandwidth requirements.

“If done right, 3D will consume a bit more bandwidth, but not much,” says Arnaud Perrier, senior product marketing manager for encoders at Harmonic, a vendor specializing in video delivery for broadcast and cable. “New standards like MPEG’s Multi View Coding (MVC) make it possible to efficiently encode two or more views without too much overhead versus a single view,” Perrier notes. “We estimate a stereoscopic 3D video encoded with MVC will consume 25 to 30 percent more bandwidth than 2D at the same resolution and frame rate.”

Many, if not most, of the cable 3D services thus far have been VOD rather than linear. VOD could remain the norm if operators are concerned about the bandwidth impact of high-quality 3D.

“VOD is the ideal distribution vehicle for 3D because it’s a switched service, so it doesn’t tax the distribution network as much,” Perrier says. “And it can be targeted to premium, high-ARPU subscribers equipped with advanced receivers.”

The lack of commercials shot in 3D is another reason why VOD is a good fit, at least for the near future.

“It’s not a good idea to do too much switching back and forth between 3D and 2D,” says Motorola’s Luthra. “It might become disturbing to some people.”

But despite all of the technological and marketplace wild cards, many operators and programmers are still optimistic to the point that they’re willing to keep investing money in 3D.

Says ESPN’s Pagano: “The train is starting to get put on the track, and now we’re trying to figure out how to make it move.”