May 2011

Monitoring the Maturation

 

At the recent Digital Hollywood, where I moderated 2 panels on 3D, I was asked how I would characterize the maturity level of the modern era of 3D.

The short answer is it is maturing, but how that is arrived at requires a review of what has transpired in the past several years.

Modern 3D began in November 2005 with the release of Chicken Little. It was a bold move at the time by Disney, Dolby and RealD, but most innovations tend to be that way.
 
All three companies fared well with the risk they took. The two projection companies, RealD and Dolby, have staked out competitive shares in the industry with their respective technologies.

Disney has a significant presence in both the number and quality of 3D movies. Their ESPN sister company has been a leader in bringing sporting events to the market, even before there was much of a market in terms of the installed base of 3D TVs.

Many others have joined the fiercely competitive industry since. Some have won, some have not, and there are many whose success is still to be determined. They range from the other major studios and independents to other 3D broadcast networks, exclusively or on an existing net, and a full complement of equipment providers at all points on the value chain.

Many industries go through various types of growth curves, from start up and nascent to growing and on to maturing and to mature. It is no different for modern stereoscopic cinema.

There are many analogies to be drawn between CGI and stereoscopic 3D, as well as from the introduction of color, sound and other new technologies that have impacted the movie and TV production, distribution (including home entertainment) and exhibition industry segments. See Frenzy in the Third Dimension.

During the various cycles, different companies and technologies enter the picture, so to speak. The supply chain and its related sophistication, or lack thereof at times, involves a wide range of companies, each attempting to eke out a slice of the market for its product or service.

At different times and for different companies or combinations, there are different business models in place at the earliest stages, sometimes to seed the market in order to promote faster growth.

So, what constitutes maturing or maturity?  Are we there yet? How will we know when we arrive? Is the answer market penetration, technology sophistication, content ubiquity or even market acceptance?
 
Market acceptance seems to be a given at this time. 3D movies have achieved enormous success, certainly on a macro basis, with some movies doing very well and others, not so well, but no matter what, the public is generally aware of the product.

Newspaper ads for 3D movies used to include “also available in 2D.” Apparently that was too confusing for some as we recently saw an ad in the LA Times that indicated “available in non 3D.” If 3D has become the default, that is an indication of its progress along the industry’s maturity continuum.

The theatrical exhibition industry is still the driver for all other release windows. Digital cinema is inextricably tied to the growth of 3D stereoscopic cinema. By some accounts, 3D is and has been the primary reason for theaters to convert. At this writing, 3D comprises some 65%+ of total digital cinema deployments.

By this standard, on a global basis, we have not yet reached a saturation point. There are still times when there are not enough 3D theater screens available for all of the 3D releases to get sufficient time at the theaters before being relegated to a 2D screen when new 3D releases force the rotation.

This year’s CES and NAB showcased the sophistication level of equipment, including the announcement of the Cameron-Pace Group, the very large and most compelling demonstration of 3Ality, the continuously busy Element Technica booth and others, in various industry segments, from hardware to software and, of course, production services.

We are seeing more and more content being created and the industry has for the last 9 – 12 months spawned several start ups and the continued growth of made for TV content by the established players, all hoping that in due time there will be a sufficient installed base of 3D TVs.

From the early days of TV, movies and sporting events were primary drivers. The same held true when color was introduced and again when HD came into the market. Prices for the 3D TVs have been dropping, so before too long the non-early adopter will enter the market. It will signal a part of the replacement cycle for TVs, much the way that it occurred in the prior introductions of color and HD.

The cycle will speed up when the general public becomes more aware of 3D TV events. The Superbowl in 3D will help, when/if that occurs. However, just as “also available in HD” was inserted at the bottom of the screen at the start of TV shows, a similar “available in 3D” will push the process along, even if it is subliminal at first. But first, more 3D TV content must be produced for prime time.

As the maturation process continues, we will see a bigger and more sophisticated industry. There will also be changing business models as traditional industry economics take hold, e.g. most movies lose money and most TV shows only last for a few years. Companies that seeded the marketplace amidst lower pricing, sometimes at or below cost, will find that not sustainable. In fact, that is a very clear lesson learned from the CGI rollout in the 90s.  

So, that raises the question again, where are we on the growth curve for 3D? The industry is well on the way to maturity. It is not in its adolescent phase generally speaking and is well into maturing.

Stand by as we monitor the maturation. And when we get there, we’ll look back and say it grew too fast.
 

 

Trends in the Marketplace

 

TV penetration - Perhaps most startling is the widely reported decline in the ownership of TV sets in the US.  Nielsen reported that 96.7% of US households now have a TV compared to 98.9% in the last report. 

 

First reported in early May, reasons for the decline have included cord cutting, the economy, too many other screens that we all look at, etc.  It is too early to use a phrase that we often cite as changing and “never looking back.”

 

Indeed, we remember when we first heard, a long time ago, that there was a higher penetration of TVs in US households than telephones. 

 

Wireless only – Not exactly a surprise for most of us that the trend is prevalent, but the announcement by the National Center for Health Statistics of the states with the highest incidence of wireless only are Arkansas (35.2%), Mississippi (35.1%) and Texas (32.5%) is intriguing.  Of course, those are percentages not absolute numbers and given the population size in Texas, one could conclude that the state represents the largest number in this analysis.

 

At the lower end of the spectrum, the list cites Rhode Island (12.8%), New Jersey (12.8%) and Connecticut (13.6%). 

 

To what do we owe this trend?  The New York Times attributes it to “patterns of consumer behavior that are driven by age, mobility and, in a strange twist, poverty.”  And there was a time when only the wealthy or at least well to do had a mobile phone.

 

Interestingly, the Report discusses the implications on studies that rely on phone surveys.

 

Of course, there is a continuing decline in land line subscriptions.  We rely totally on our mobiles.

 

Download/streaming market share – M&E Daily reported on April 19, 2011 that “Netflix’s share of all digital movie units (downloaded or streamed) reached 61% between January 2011 and February 2011, according to the NPD survey.  Comcast’s VOD service places a distant second at 8%.  DirecTV, Time Warner Cable, and Apple each claim a 4% share.

 

As for The Shindler Perspective

 

The recent Digital Hollywood that ran from May 2 – 5, 2011, saw Marty Shindler moderate two panels on 3D, one entitled “3D in TV and Film- Analysts and Investment: A View from the Street” and included four widely respected Wall Street analysts and two executives from publicly traded companies. 

 

The second panel at the conference “The 3D Industry: The Explosion of 3D in Feature Films and Television” was comprised of executives from Cinedigm, Digital Domain, Spectacle 3D, THX and a leading industry stereographer. 

 

Both panels were well attended. 

 

As hot a topic as 3D is these days, environmental green is even hotter.  As a part of our continuing effort to bring to market  eco-friendly 3D glasses , (the environmental statistics are overwhelming) we have attended various panels and conferences involving environmental issues, such as the Go Green Expo, where we met with Ed Begley briefly and the  Event Live Expo 2011  conference of AEG.

 

We discussed the eco-friendly 3D glasses with Dave Gardy of TVWorldwide during NAB 2011.  Scroll to the Oculus3D tag and enjoy.

 

 

Those who follow Marty Shindler on Facebook, LinkedIN and Twitter, know that one of the more far reaching very recent events was the Cereplast celebration on the eve of Earth Day 2011.  That event centered on the unveiling of the new bioplastics symbol, a result of a global contest.  One of the judges was Dr. Gary Anderson, the creator of the ubiquitous recycling symbol.  Look for this new symbol to appear more and more in the coming years. 

 

 

If you are planning on attending Cine Expo at the end of June, please send me an email so that we can meet there. 

 

Roberta and I wish our friends, clients and prospective clients continued success and good health.

 

For The Shindler Perspective, Inc.

 

Sincerely,

Marty Shindler

Chief Executive Officer

 

 

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© 2011 The Shindler Perspective, Inc.