CES attendees go in-depth with 3D TV

But analysts caution that consumer adoption may take time

The Consumer Electronics Show is perhaps best understood as a conspiracy between Eros and Mammon, a four-day stroll through a technological red-light district where gadget heavies manufacture desire out of ballyhoo and circuitry.

Crowds at last week's CES did most of their heavy breathing around the various 3D TV displays as two programmers and a distributor promised to provide the content to satisfy the early flush of consumer ardor. ESPN and Discovery Communications last week unveiled plans to launch dedicated 3D networks, twin initiatives that would be subsidized in part by Sony. The next day, DBS operator DirecTV took the wraps off its 3D blueprint, a pay-per-view channel backed by Panasonic.

The debut of ESPN 3D will coincide with the start of soccer's World Cup tournament, which kicks off June 11 with a match between host nation South Africa and Mexico. Discovery's service, a joint venture with Sony and Imax, is expected to debut sometime next year. Meanwhile, DirecTV intends to have its 3D channel up and running in time to carry Fox Sports' broadcast of the baseball's All-Star Game on July 13 in Anaheim.

While all three ventures promise a wealth of 3D programming, analysts said the early enthusiasm for the format is a case of the tail wagging the dog.

"With 3D, you're talking about a hardware cycle," Barclays Capital media analyst Anthony DiClemente said. "It will be a long time before the (consumer electronics) guys are going to be able to ship in enough volume to get to significant market penetration."

The Consumer Electronics Assn. estimates that fewer than 1 million of the country's 114.9 million TV homes boast a set that can display 3D content. However, given the industry's yen to breed and feed off an almost entirely new product category, 3D penetration is expected to metastasize during the next several years. The CEA projects sales of 4.3 million 3D sets in 2010, with the new format accounting for nearly a quarter of all units shifted in 2013.

Industry boosterism aside, Leichtman Research Group president Bruce Leichtman said investors should be wary of what he calls "the CES Effect." For example, TiVo had its epochal coming-out party at the 1999 show, and 11 years later, DVR penetration is still hovering around 36%.

"We saw a similar phenomenon with HD," Leichtman said. "Until Discovery launched its HD channel in 2002, there really wasn't any high-def programming available. So for four years there really wasn't any reason to buy HD sets, which also happened to be incredibly expensive."

The adoption of 3D is likely to be a deliberate process, following the path blazed by HD in the previous decade. (Introduced in 1998, HD penetration now stands at 46%.) Even the players are the same.

"ESPN and Discovery are doing almost exactly what they did in the early days of HD," Leichtman said. "They know that 3D isn't going to come flying out of the gate, but they're preparing for the eventuality."

Because reach will be limited, inventory on the various 3D channels will be managed accordingly. Sony's agreement with ESPN gives the consumer electronics giant an apposite platform from which to market its new high-def 3D sets, while helping defray the costs of producing the 85 live events it will offer in the format. Sony will be the exclusive 3D sponsor of ESPN's coverage of the 2011 BCS National Championship Game, 13 regular-season college football games and the Summer X Games.

Media agencies already are talking with clients about the possibilities of 3D. "It may take a while for consumers to come on board, but the programming will be ready when they are," said one national TV buyer. "Don't dismiss 3D; it really has the potential to transform advertising. Think of the cool things you can do with automotive. Just imagine."
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