1. 3D Brief: Current State of US Market, Trends, Directions
July29, 2010
RogerTowne
SeniorManager,ProductPlanning
SamsungSTA,Set-topBoxes
____________________________________________________________________________________________________
Executive Summary
3D is at the bottom of the bell curve,a new technology that has some challenges but many opportunities. For
consumers, it is a nice-to-have feature, not a must have. The costis still toohigh and questions about the user
experience still need to be solved. But there is a great future ahead:
 The Consumer Electronics Association expects 2.1 million 3DTVsets to ship in the U.S. in 2010. iSuppli
predicts the 3DTV market will grow to 12.9 million shipments next year and to 60.5 million by 2014.
 3D has made a splash and is capturing consumer interest. But awareness is still low with only 13% of
households familiar with 3D TV. The popularity of 3D cinema and games are the biggest drivers of
awareness and interest.
 With the success of Avatar, Hollywoodis bullish on 3D. More 3D movies are on the way, as many as 24
this year. Movie theaters charge a premium price and the take is factoredinto the movie’s overall box
officerevenue. The end result is that a movie released in 3D can boost sales up to 25%.
 Several recently released movies were not created organically with 3D in mind (as was Avatar). Instead,
they were convertedfrom 2D to 3D. The result is the quality of experience is affected. For moviegoers,
when the price of the movieticket is factoredin, some consumers are questioning the overall value.
 The cost foroutfitting the digital home for 3D is considerably high. A fairly well equipped 50” model 3D
TV can run $300-400 more than convention2D version. 3D are running $150-200 each. When adding a
3D Blu-Ray player ($300-400) and HDMI 1.4 cable ($40),it can easily cost a family of four over $3,000.
 The dearth of home content is also a factor. There are few 3D TV channels currently available, only a
handful of 3D Blu-ray titles, and a small proportion of 3D games. Not all content is desirable to see in 3D,
and the 3D experience doesn’t always translate well to all types of content.
 The accessibility of technology forall electronicscompanies will only further help enable 3D market
adoption. This will only help to drive prices downand proliferate innovation.
 3D content will become more common, but 2D viewing will not go away anytime soon. 3D willnot
become the de-facto standard. Instead, it willbe a complementary technology.
 Glasses-free 3D displays are in development, but are still several years away from being cost-effective
and widespread.

2. 3D Overview
3D television utilizes 3D presentation techniques to project programming into a realistic three-dimensional
field. The techniques used are autostereoscopic and multi-view capture. Autostereoscopic does not require
3D glasses, multi-view does. Autostereoscopic 3D displays are already available, but 3D programming for
them are rare. Content production is expensive and complicated, requiring as many as 8-9 views of the same
scene. As such, the industry is focusing on multi-view technology for now.
How 3D works- Our eyes are spaced apart from each other, whichmeans our left and right retinas see objects
at slightly different angles. In real life, the brain merges these two images into a single three-dimensional
image. To recreate this depth of experience on television, a 3D TV will display two separate but overlapping
images of the same scene simultaneously, and at slightly different angles as well.
Multi-view 3D requires glasses to be viewed. There are two types of 3D glasses; activeand passive. Active
glasses use a shutter technique to quickly blockthe left eye, then the right. This is done in sync with the TV
whichis also alternating the left and right images rapidly. The glasses help the mind merge the twoimages
into one, creating the 3D effect. Samsung offerstwoforms of 3D glasses - battery-operated and rechargeable.
Both fit comfortably overprescription glasses. Passive glasses use polarization to separate the left and right
image. This technique is used in movie theaters. Passive glasses do not require any power to operate.
Cinematography, motion control, and lighting are significant factorsin 3D production process. Below is a brief
overview of how 3D content is captured, and where things are headed.

3. Below is an outline of the production differences between 2D and 3D. Today, 3D is a parallel production effort
and an independent program. That’s expected to change in the near future.
The value of 3DTVis typically seen in a viewers’ ability to immerse themselves into the programming, creating
the illusion of being part of the story as the graphics envelope them into a three-dimensional room. Toview 3D
TV, three dimensional programming must be produced using special cameras and production gear. To receive
3D content in the home, more bandwidth can be required to stream the 3D content over MVPDnetworks.
Lastly, a 3DTV is required to display the content, and 3D glasses must be worn to actually view the
programming.
Stakeholders
The 3D industry encompasses the followingmajor stakeholders:
- Content producers, such as movie studios, TV programming networks and others
- Gaming industry, whomake the game consoles and softwarecontent
- Productiongear manufacturers, whomake the cameras, pre/post product equipment and other gear
- Movie theater operators, who collectgate receipts to show Hollywoodhit movies to audiences
- Consumer electronics manufacturers, whomake the 3D TVs, glasses, Blu-ray players, cameras, etc
- MVPDs,such as Comcast, DirecTVand others who distribute 3D content over their networks directly to
homes
Eachstakeholder clearly sees an opportunity to expand their business. Below overviewsthe impacts on the
major stakeholders:

4. ContentProducers
Hollywoodmoviestudios - The success of 20th Century Fox's Avatar has HollywoodStudios bullish about 3D.
Offeringa movie in 3D can not only increase the box officedraw, it can boost a movie's profits. A 3-D version,
with ticketprice of $3-7 more than a 2D version, can add as much as 25% to the bottom line, according to the
Wall Street Journal. In the case of Avatar, the higher-priced 3-D and IMAX screens consistently sold out before
its 2-D ones. The end result was that 75% of its revenue came from 3-D screenings. Likewise, for Clash of the
Titans, while only 28% of movie theaters were able to show the feature in 3D, the 3D showsings still accounted
for 52 per cent of total revenues. The fantasy adventure Alice In Wonderland, had the sixth biggest opening
weekend of all time in March, grossing $116 million. Twothirds of the take came from3D screenings. The
total number of major films released in the 3D is expected to reach at least 24 by the end of the year, with
several studios planning to have 3D versions of all major tentpole releases in the future.
Major media conglomerates – TV broadcasters and major networks have been enticed by market projections
suggesting that a programming shot in 3D generates 20-30% more viewer interest. As such, several are now
launching 3D television channels. ESPNrolled out its 3D networkto coincide withthe beginning of the World
Cup. It’s also broadcasting its first 3D TVoffering outside of the US, with coverage from the X Games 16
screening this weekend in Australia. More 3D channels are on the way from Discovery,Sony, and IMAX.
Turner Sports and the PGA will offer3D Coverage of the 92nd PGA Championship. The FIFA World Cup and
other programming will be broadcast in 3D. In all, these are serious investments which at this point cannot be
justified based solely on the number of 3DTVs currently in the marketplace.
GamingIndustry
3D games may help give the 3DTVindustry its biggest push into the home. The PlayStation 3 has alwaysbeen a
powerfulenough piece of hardware for 3D, and Sony is now heavily leveraging the platform for3D. The
company is bundling 3D PS3 games with some of its 3D televisions, in some cases forfree. Sony,in particular,
considers 3D a core strategy for its entire business, with its Blu-ray format as a big factor. At the same time,
Nintendo made 3D the central selling point of its new handheld, the 3DS – whichcan also take 3D pictures.
Unlike the rest of the industry, Nintendo opted forautostereoscopic technology. Currently, the 3DS is the
second-best selling gaming device of all time (after the PlayStation 2) and a huge part of Nintendo's business.
Likewise, in June, Microsoftintroduced the Kinect gaming kit which allowsusers to play 3D games using the
Xbox 360. 3D games made forthe PlayStation3, 3DS and XBoxare already available, with more on the way.
MovieTheaterOperators
So far only about 5,000 screens (12.5%) in the US have been converted to 3D. That means the remaining
35,000 (87.5%) are unable to show 3D movies. Theater chain companies are ordering digital 3D projectors,
who’s manufacturers are currently making as fast as they can, but they cannot install fast enough. The end
result is that Hollywoodstudios are releasing more major 3D releases than the theaters can handle. This is a
serious constraint on how many films can be widely released in 3D at once. Yet Hollywoodstudios, eager to
recreate some of Avatar's record-breaking success, aren't letting that stop them from flooding the market with
3D releases. Theater operators will continue installing 3D gear, not only to meet demand, but to pad their
profits. The 3D movies cost25-50% more forconsumers to view,and they require the use of passive 3D
glasses, another source of income whichadds nicely to the theater operators’ margins.

5. ConsumerElectronicsManufacturers
Consumer electronics companies are very bullish on 3D technology. New cameras, camcorders, TVs and Blu-
ray players are either being planned, introduced or are already on the market. Panasonic’s HDC-SDT750
camcorder can record videos in 3D and costs $1400. Samsung is releasing a 3D smartphone. MSI's latest all-in-
one touchscreen PC renders everythingin 3D (even 2D content). There is already a wide range of 3DTVs
available, with starting prices of less than $1000 for 720p plasma 3D TVs fromSamsung up to $6000 forthe
top-of the line models. More willbe launched later this year, especially at the IFA consumer electronics show
in Berlin, Sept. 3-8. The prices of 3DTVs have also been falling. Samsung’s launched a basic 40-inch LCD
UN40C7000 model priced at $1,999 in March. That same TV is now available on Amazon.com for $1,499. Still,
all manufacturers intend to cash in on the excitement and high profitmargins. Sony says it expects 3D-enabled
television sales to account for30-50% of all its HDTV sales by 2012.
SoCs - The set-makers use SoC and other components, most of whichare commodity items and widely
accessible to all, in order to make 3DTVs and other CE goods. For TVs, Chipmakers provide the SoCs and the
software,then 3DTV manufacturers make the display panels out of conventionalLCD panels. The key
takeaway here is that the accessibility of technology for all electronics companies willonly further help 3D
adoption, drive prices down and proliferate innovation.
MVPDs
Competitive differentiation – There is an increasingly competitive environment between cable, satellite and
telco pay-TVoperators, and 3D is a point fordifferentiation. The FIFA World Cup featured on the ESPN 3D
channel created a competitive focalpoint. Comcast, AT&T's U-verseand DirecTVall secured carriage
agreements with the network (eventhough it doesn’t air programming when no liveevents are taking place)
and carried the event. In July,the YESNetwork,FSN Northwest and DirecTV produced a New YorkYankees-
Seattle Mariners baseball game in 3D. Yet while DirecTVhas attempted to use 3DTVas a competitive
advantage overcable rivals withthe launch of a trio of a 3D channels, its impact is limited since most cable
MSOs can compete in the 3D space with on-demand movies and events.
Business impact – Aside fromAT&T, who requires U-verse subscribers to pay a $10 monthly premium for 3D,
most MVPDs have yet to charge subscribers a fee for3D services. But operators willundoubtedly boost
revenue by introducing new 3DTVpremium tiers, charging monthly subscription fees, and asking higher prices
for 3DTVmovies on-demand and special events (concerts,sporting events, etc). There may also be instances
where MVPDscharge more for the new set-top box whichmay be required to view the 3D content. But until
the 3D market matures, technical standards are adopted, more contentis available, and the consumer
proposition is proven, many MVPDs willchoose to invest their capital expenditures (CAPEX) onmore lucrative
and immediate needs.
Technical challenges - Cable operators, telcos, and satellite TV providers facetechnical challenges in rolling out
3DTV. Currently, most cable operators currently use a frame-compatible 3D format,which uses the same
amount of bandwidth as an HDTVsignal. The downside is this approach delivers 3D content in half-resolution
images. For cable operators to offerfull resolution 3DTVprogramming, either more bandwidth is required or
new video formats must be adopted whichrequire new set-top boxes. Neither is a friendly proposition. Still,
over the long-term, 3DTVmay provides additional justificationfor cable operators to embrace MPEG4. This
would not only provide greater compression efficiency and thus more network capacity,but it would enable
more 3D contentgoing forward.

6. Current Trends
There is no doubt that 3D has made a splash and is beginning to capture consumer interest. But awareness is
still low. Currently, 3D cinema and games are the biggest drivers of 3D popularity. With the success of Avatar,
Hollywoodhas been very bullish about 3D. Hollywoodis generating more 3D movies, as many as 24 this year.
The availability of more gaming and TV sports contentin 3D is also creating awareness. Subsequently, this has
led toincreased interest in 3DTVs, games and other 3D electronics like cameras and camcorders. In turn, new
products are being introduced and shipments are on the rise.
Facts & Figures:
 When Avatar was released last December, 71 per cent of Americans who went to see it on opening
weekend opted fora cinema showing the 3D version
 China banned 2D showings of Avatar when it was released in the country
 At least 24 Hollywoodfilmsare expected to be released this year in 3D
 3D versions of movies can boost the box officetake by 25%
 Moviegoers are paying 25-50% more to view 3D movies
 Only about 5,000 (12.5%) of the 35,000 movie screens in the US have been retrofitted for3D
 DisplaySearch predicts 3DTVsales couldreach 3.4 million worldwidein 2010, a sharp increase from
the 214,000 units that shipped last year. The company believes 42.9 million units will ship in 2014
 According to Parks Associates, 13% of households are familiar with3D TV, up fromabout 10% from the
previous quarter. Moreover, 48% of these households might be willing to pay forsome 3DTV content
 The Consumer Electronics Association now expects 2.1 million 3DTV sets to ship in the U.S. in 2010,
double its forecast fromearlier this year, with revenue in the segment expected to exceed $2.7 billion
 iSuppli predicts the 3DTV market will grow to 12.9 million shipments next year and to 60.5 million by
2014
 Ubisoft,a French game maker, estimates that around 50% of all games sold in the US will be in the 3D
format by 2012.
 12% of all people have issues withtheir “binocularvision”, making viewing of 3D images extremely
difficult,if not impossible.
Challenges
The 3D industry is facing many challenges, some more vexing than others.
Cost – As with most new technologies, cost is high when it’s introduced. This alone acts as a barrier to entry for
consumers. The cost of a 50” 3D display with the latest features runs $300-400 more than a current LCD TV.
3D glasses are an additional $150-200 apiece. A 3D Blu-ray player is about $300-400, plus another $40 forthe
HDMI 1.4 cable. All told, fora family of four, the cost can be well over $3,000. In addition is the cost of content,
whichcan include higher priced 3D Blu-ray titles and premium fees forMVPDprogramming.
Content availability – As previously noted, there is scant 3D programming. In some cases, as withESPN 3D, the
networkgoes dark when there are no events. The selection of 3D Blu-ray titles is not much better, a quick look
at Amazon.com shows less than 10-12 3D Blu-ray discs available. There is only a small proportion of 3D games
available. In all, though 3D content availability is increasing, programming is still extremely limited at this
point.

7. Quality of Content - The quality of the 3D experience is not equal across 3D movies. That’s partly due to the
factthat Hollywoodstudios have hurriedly converted2D films over to 3D in hopes of cashing in on the sudden
popularity created by Avatar. But when films are convertedfrom 2D to 3D conversion, often it doesn’t work
very well and the result can be murky pictures. After seeing director M.Night Shyamalan's summer
blockbuster The Last Airbender, the influential US film critic Roger Ebert said it "lookedlike it was filmed with
a dirty sheet over the lens". Clash of the Titans, whichwas also convertedand released in April, was the butt of
similar criticism and was accused of actually turning audiences off to 3D. Hollywoodmogul Jeffrey Katzenberg,
whowas not involvedwith the film, called it a "cheeseball conversion"and suggested it was helping to "kill that
goose that is delivering us golden eggs". Others have questioned Toy Story 3 in 3D, where the 3D benefits were
barely visible, calling the experience forgettable.
"Thethingwith 3D isthat everythinggets dim,"Abrams said,taking the morecautious
approach."Itall feels alittle grey andmuted.I want to seethe vibrant[colors],I wantto
seethe movie.I getinto it I adjustto it, but for me it always feels like thosefirst five minutes
feelsless thanthe IMAXexperience,whichis my favoritekind of immersiveexperience.The
3D thing, I'mnot totallyonboardwith yet." - Joss Whedon,arguablyoneof themost
influentialcreative forcesin the industrytodaywith such credits as Firefly,Buffy, LOST, and
Star Trek
Maximizing the technology - Of all the 3D movies released to date, Disney’s Up! and James Cameron’s Avatar
have been the best at maximizing 3D technology. Avatar was specifically designed and filmed with 3D in mind
from the ground up. Up! had experienced film makers at the helm looking to make the best of 3D. But at this
early stage of the market, Hollywoodstudios have been more interested in maximizing profits rather than the
quality of experience. The result has been moviegoers less “wowed” by the experience and thus less inclined to
pay additional ticketprices to view 3D movies. Overtime, as moviestudios become more intimate with the
knowledge and techniques of developing and releasing 3D films, more willorganically integrate 3D in order to
make the viewing experience richly successful.
User Experience – Presently, a few factors about current 3D technology can detract from the viewing
experience. One is the viewing angle. The best viewing angle is centered in frontof the programming. If the
seating is off to the side, the quality of experience can degrade. In a movie theater, if seating whichis way off to
the side or directly under the movie screen, viewingcan be dramatically affected. The second factoris the 3D
glasses. They can be large, cumbersome and awkward, especially if the user already has prescription glasses.
Peripheral vision and natural user interaction can both be affected. In some cases, the glasses can cause
dizziness or nausea. Lastly, approximately 12% of all people have issues withtheir “binocularvision” making
viewing of 3D images extremely difficult,if not impossible.
Value –For tentpole movies released in theaters, consumers have been willing to pay 25-50% extra to enjoy a
3D experience. But if the experience leaves them wanting, let alone disappointed, the value proposition will
degrade and they will be disinclined to pay the premium price again. Evidenceexists that audiences have
already experienced declining value as the proportion of moviegoers who see new films in 3D versions has
fallen steadily overrecent months. Instead, more are opting instead to watch them in the traditional and
cheaper 2D format. Likewise, 3D game reviews show that enthusiasm for3D games may also be coolingdown.
The common theme here is that the perceived added-value which3D provides is not worth the extra cost to
consumers. When it comes to outfitting the digital home for3D, for mass adoption, consumers must feel the
technology is both cost effectiveand beneficial. They also must have ample 3D content available at a
reasonable price. Currently, costs are exceedingly high forequipment and content as almost nonexistent.

8. Future Looking
Clearly, costs will come down, contentavailability will increase, quality on all levels will improve, and viewing
experiences will get better. “The holy grail for 3DTVis to get rid of the damn glasses,” Heavy Reading analyst
Craig Leddy writes in the report "Cable Operators Weigh Tech Options forDelivering 3DTV".
Effortsare under way to build glasses-free, auto-stereoscopic displays, whichmany believe is the future of 3D
technology,but they willcome with a high price tag. Chinese manufacturer TCL is already shipping its 42-inch
TD-42F in China, but the cost is about $20,000.
Samsung and Sony are among the companies on the forefrontof this research. During the Emerging
Technologies portion of SIGGRAPH 2010, Sony showcased the 360-degree autostereoscopic display prototype
called RayModeler. The device is a compact version of a 3D display enclosed in a cylinder. One can view the
display from all directions and see a bright, color3D image. According to Sony, the system is the first display of
its kind, featuring special LEDlight sources that show 360 unique, 24-bit colorimages in all directions.
Veteran media analyst Larry Gerbrandt has predicted that adoption of 3DTV will first be accelerated viavideo
games and 3D camcorders, then by natural consumption of content. He noted that studios are increasingly
shooting their tentpole movie releases in 3D. Likewise, TV producers are shooting in 3D even if their shows
aren't shown on 3D yet. “As equipment costs come down and behind-the-camera expertise goes up, it is likely
more TV shows will be at least mastered in 3D to enhance syndication longevity and value," Gerbrandt wrote.
In the end, 3D is at the bottom of the bell curve, a new technology that has some challenges but many
opportunities. 3D content will become more common, but 2D viewingwill not go away anytime soon. 3D will
not become the de-factostandard. Instead, it willbe a complementary technology.

9. Sources
Audiences Are Revolting Against 3D And The Format May Already Be Dead by JoshTyler
www.cinemablend.comJuly 27, 2010
The Trouble With 3D: Why Hollywood'sSavior Could Be Bad For Movies by www.cinemablend.comJanuary 31,
2010
3D TV: TooLittle To Survive, TooMuch To Die by Kurt Bakke www.conceivablytech.comJuly 28,2010
Joss Whedon and J. J.Abrams Sound Off on 3D by GregTito www.escapistmagazine.com July 24, 2010
Flip-a-Switch2D to 3D by Arlen Schweigerwww.electronichouse.comJuly 27,2010
HollywoodFears the 3D Bubble Has Already Burst by Nick Allen www.telegraph.co.uk July 24, 2010
3D Movies Are Still Killing It by Nick Saint www.businessinsider.com July 22, 2010
Your Primer On The Industry's Massive Investment In 3D by Nick Saintwww.businessinsider.com June 23,
2010
3-D Movie Trailer Smackdown:Blockbusters Fighting To Be In YourFace In 2010 by GillianReagan
www.businessinsider.com February 16, 2010
Publishers Scout Another Dimension -- 3D by BridgetCarey www.miamiherald.comJuly 20, 2010
Blu-ray 3D, More TV Models Boosting 3D TV Shipments by AgamShah www.pcworld.idg.com.auJuly 28,2010
BSkyB Confirms Consumer 3D TV Channel Launch by Jessica Hodgsononline.wsj.comJuly 28, 2010
Warner, LG Bow First 3DTV/Blu-ray Disc Bundles by Erik Gruenwedelwww.homemediamagazine.comJuly 27,
2010
ESPNLaunching 3D OfferingOutside US by RoseMajorwww.rapidtvnews.comJuly 28,2010
Turner Sports and The PGA to Offer3D Coverage of the 92nd PGA Championship Through PGA.comand TNT’s
Television Distributors by RobertSeidmantvbythenumbers.com July 28, 2010
Panasonic Unveils 3D Camcorder by DawnKawamoto www.dailyfinance.comJuly 28,2010
3D Camcorders Could Boost 3D TVAdoption by Keith Shaw www.networkworld.comJuly 28, 2010
Parks: 3D TV Awareness Gradually Increasing by Dan O'Sheaconnectedplanetonline.com July 28, 2010
80% of TVs sold in US will be 3D-ready by 2014 by www.iptv-news.comJuly 28,2010
Report: 3DTV Not Ready for Prime Time by SteveDonohue www.lightreading.comJuly 28, 2010
Cable Operators Move Forward on 3D Despite Reservations by RobertSeidmanfinance.yahoo.comJuly 22,
2010

10. 3D TV home: Success inevitable claims film experts by Luke Johnsonwww.t3.comJuly 28,2010
So When Will 3D Come Of Age? by www.imdb.comJuly 28, 2010
CEA Ups 3DTV Forecast To 2.1 Million Units For 2010 by ToddSpanglerwww.multichannel.comJuly 22,2010
Ten Percent of the Population Can't See 3D Movies or Television by www.wbir.comJuly 27,2010
Samsung Unveils A 3D TV For Under $1000! by Mark Raby www.i4u.comJuly 21, 2010
Internet TVGrowth Outpacing 3D TV by DougOlenick www.twice.comJuly 28,2010
3D Motivates Comcast To Think MPEG-4by LindaHardesty www.cable360.netJune17, 2010
3D TV hype builds by AsavinWattanajantra www.theinquirer.net June 16, 2010
3D TV showing of WorldCup ss nifty,if not without issues by EdwardC.Baig www.usatoday.comJune17, 2010