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The Battle between 3D TVs vs Smart TVs

Smart televisions are expected to be showcased everywhere at the 2011 Consumer Electronics Show. Samsung, Sony, Toshiba, LG and Visio will all launch Smart TVs that enable viewers to search and find video content on the web, on local cable or satellite and locally stored hard drive content. Will Smart TVs have the same impact as 3D TVs did in 2010; lots of buzz but few buys?

3D TV showed such promise. In the 2010 Asia Pacific Pay TV Operators Survey by GIA and Content Asia for example, Pay TV operators were relatively enthusiastic about the new television format.

Early entrants into the 3D TV space include some big players. Few other than Panasonic and Sony have rushed to bring 3D TVs to the market while LCD panel makers like AUO or LG have not been investing heavily in 3D TV technologies.

A lack of good content has been the bane of the sector. In China for instance, Disney Interactive Media Group (China) and 3D Gaming (Hangzhou) released their first product in January 2010. Sadly, aside from a few movies and some sporting events, it lacked a lot of content.

Currently there are 2 types of 3D content, converted 3D and Native 3D. Converted 3D movies are 2D movies that are converted to 3D images in postproduction. Native 3D movies are filmed using new 3D camera rigs manufactured by a few innovative players such as PACE and Sony. In an effort to release as many 3D movies as possible, Hollywood has been utilizing the easier method of converted 3D. Filming in Native 3D is challenging. Not only is the new production equipment expensive, but the necessary talent to shoot and edit Native 3D films scarce. This has therefore limited the speed at which 3D films are being shot and produced.

3D TVs just have not brought consumers into stores. The Consumer Electronics Association in September 2010, cut its forecast for shipments of 3D TVs to the US in half, from its July estimate of 2.1 million units to 1.1 million units for 2010.

Why have 3D TVs not lived up to expectations in terms of consumer sales? GIA analysis identifies several reasons.

Why consumers haven't been thrilled with 3D TVs

The first problem was timing; Consumers upgraded to newer larger LCD and Plasma TVs in droves in the period between 2007 and 2008, meaning that few are looking to replace them any time soon. The weak economies and consumer sentiment of mature economies in 2010 did not help drive sales of 3D TVs either.

Secondly, 3D TVs were released a little too early before the mass availability of 3D content. For the 2010 Christmas season, only 36 3D Blu-ray titles will be available for purchase, with the majority being conversions into 3D rather than true 3D productions like Avatar. In terms of television, channels such as Discovery channel, DirectTV in the US and Sky in the UK have been investing in 3D TV content. There is however, still a lack of supply to drive consumers to invest upfront for a 3D TV.

There have also been disputes over eye health issues. In June 2010, Samsung released health warnings on its Australian website, saying that consumes could suffer stroke or dizziness by watching 3D TV for a long time or hurt their eyes by watching 3D TV too closely or by wearing 3D glasses outdoors.

The total cost of ownership (TCO) is another factor. Even though 3D TVs are reasonably priced, when compared to equivalent sized 2D models, TOC can be high for a family. Smaller 40" models impede on the 3D viewing experience, while the larger 65" models are priced at over $6,000. Added to that will be the cost of active-shutter 3D glasses that cost an addition $100 to $200 per pair.

It is also important to note the different viewer experiences with 3D movie theatres and 3D TVs. In the home 3D experience, screens are much smaller. Even with the largest 65" screens, the action is usually cut off on each side within a viewer's line of sight. Moreover, television viewing at home tends to be a group activity that is interactive and engaging. 3D glasses limit the ability to interact with others in the room; those not wearing 3D glasses cannot participate in the movie screening on the same level.

Another factor affecting the current uptake of 3D TVs is the future of 3D TV development. Currently, many TV manufactures are working on new glass-less 3D technologies. In October 2010, Toshiba released the first glass-less LCD 3D TV and industry insiders predict that all 3D TVs will be glass-less by 2015. Consumers may also be putting off their purchases for this reason.

Will Smart TVs have the same impact as 3D TVs did in 2010; lots of buzz but few buys?

Smart TVs – the smarter consumer choice?

Smart TVs can be thought of as larger iPhones or mounted Tablet PCs. They are another mode of accessing content for entertainment and an extension of technology consumers are already familiar with. Many Smart TVs utilize proven platforms such as iTunes, Google's Android platform or Samsung's Apps Store for accessing content.

Neilson research estimates that one in two adults in the US will own a smart phone by Christmas 2011 and Citigroup predicted that 35 million tablets will be shipped globally in 2011, while FBR Capital Markets estimate sales of 70 million tablets globally next year. Essentially by the end of 2011, most consumers will be familiar with utilizing Apps to access content and expecting to access high quality content on a mobile device.

The pricing models for content over Smart TVs are likely to also follow those of smartphone content purchases, with the majority of content priced between $0.99 and $4.99. Alternatively, many all-you-can download packages are being offered to compete with Netflix and HULU or even existing cable packages. The new model of TV content delivery will be very much user-driven as consumers "buy what they want, when they want".

As with all radical product innovations, the early adopter groups for products such as 3D TVs or Smart TVs can be very different. However, the greater diversity of Smart TV applications and content could drive adoption more rapidly.

The race for Smart TV content

Samsung, Sony, Toshiba, LG and Visio will all launch Smart TVs that will enable viewers to search and find video content on the web, on local cable or satellite and locally stored hard drive content. Samsung is predicting sales of 6.5 million Smart TVs in the US by the end of 2010 and anticipates demand will grow to 20 million units by 2012.

TV networks like CBS and NBC are streaming content on their websites and via advertising-supported websites such as HULU. Netflix, a provider of older movies in streaming video format with 16.9 million subscribers as of September 2010, is in talks with studios to gain access to primetime TV shows, offering to pay $70,000 to $100,000 per episode. Even Walmart is entering the online content market space. The multinational retail chain purchased VUDO in February 2010, allowing users to purchase content via a pay-as-you-go model where users can stream content on their home TVs. Amazon is also considering how to grow their share of the online video market, with plans to launch a subscription service to compete with HULU and Netflix.

Both Apple and Google are leveraging their existing experience with smartphone consumers to move into the living room. Apple TV has already formed partnership agreements with Fox, ABC and Netflix, while Google TV's recent partnership with Sony sees it working with Android apps developers as well as CNN, HBO, TNT, Netflix and Amazon video to develop content.

In the final analysis, it is not hard to predict that adoption of Smart TV technologies is likely to outpace that of 3D TV.

The real winners at the end of the day could be boxes that combine both technologies. Many new, high-end models that offer 3D graphics typically come with smart web features as well. One example is Samsung's flagship 55' 7000 series that come with a suite of pre-embedded ‘smart' applications and widgets such as Hulu, Facebook and Twitter feeds.

This is certainly a battle worth watching closely over the next few months, as market entrants jostle for the best positions. What will be the best line of attack for hardware manufacturers; Samsung's integrated or Sony's outsourced approach? Which will be the favored software platforms; Google TV or Apple TV? Who will come out the stronger players; set-up box manufacturers such as Boxee Box or web browsers such as Opera TV? Stay tuned for the results!

Francine Buchanan, Director, Intelligence Services, Global Intelligence Alliance

About the Author

Global Intelligence Alliance (GIA) is a strategic market intelligence and advisory group. GIA was formed in 1995 when a team of market intelligence specialists, management consultants, industry analysts and technology experts came together to build a powerful suite of customized solutions ranging from outsourced market monitoring services and software, to strategic analysis and advisory.

Visit Global Intelligence Alliance 

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