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Waiting for the next wave3D entertainment 2012
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2 Waiting for the next wave
Contents
Introduction 1
3D films 2
3D television 10
Other 3D screens 16
3D screens’ penetration forecast 18
13D entertainment 2012
Reviewing the past two years in the 3D entertainment market, we now find a lull – an industry that has lost momentum and faces strong headwinds. The early success of 3D and the record‑breaking accomplishments of Avatar led to overexcitement and, in many cases, too much mediocre content that could not justify the premium prices that cinemas charged for 3D.
Introduction
As we continue to analyse the 3D entertainment markets, we interview players around the world in the different industries including film studios, game studios, broadcasters, pay‑TV operators, network operators and main entertainment screens.
The 3D film industry underperformed in the US in 2011, though it did better in Europe and China. The conversion of cinemas to both digital and 3D continues, but the pace of conversion varies across regions.
In television, 3D TV sets sold quickly – far more quickly than HD TV had. But there are few 3D TV programmes, and this situation may continue as there is no stand-alone business case for a 3D TV channel. On other fronts, and other types of screens, small accomplishments offered scant hope for momentum in the short term. The most interesting prospects for 3D could be in user-generated content rather than in professional development.
So overall, 3D entertainment awaits the next wave. Can the film industry produce an Avatar-like surprise? Can consumers stir up demand for user-generated 3D content? It is hard to be optimistic in the short term.
2 Waiting for the next wave
The number of 3D screens has more than tripled since Avatar in 2009, not only in the US, but in all regions.
We see regional variations in the additional growth potential for 3D screens (see figures 1, 2 and 3). In the US, growth potential seems limited in the short term, as the film‑screen digitisation phase is coming to an end. In other regions, the pursuit of digitisation will drive the penetration of 3D screens, as the 3D upgrade is marginal compared with the investment to digitise.
This positive development in 3D-screen penetration does not translate satisfactorily into box‑office revenues. What a disappointing year 2011 turned out to be for 3D film in the US.
While 3D maintained its market share among the 20 top‑grossing films in the US in 2011 (see figure 4), the overall results were not good in the US.
Among the disappointing indicators in the US:
• The share of box‑office revenues generated by 3D decreased in 2011 for all genres (see figure 5), but also for specific genres such as animation and live action films (see figures 6 and 7).
• The average 3D box‑office revenue of 3D screens decreased in 2011 (see figure 8) with two possible explanations: a potential decrease of the 3D ticket premium and a decreasing fill‑in ratio of 3D screens. Both explanations raise critical issues on the sustainability of the 3D business case, as 3D was supposed to provide additional
3D films revenue (the 3D ticket premium) that could be split by the exhibitor and the distributor/producer. In 2009, the share of 3D box‑office revenues was 38% higher than the share of 3D cinemas releasing the film vs 9% higher in 2010 and 10% lower in 2011.
These disappointing results have added fuel to a debate on 3D sustainability and on the value of the 3D premium that has raged in the US since Avatar (see figure 9). “The audiences have now come to realise that there are bad movies that can be in 3D as well, and that on top of that you are being charged an extra $5 to see a movie that was as bad as the one you saw in 2D,” said director Peter Jackson*. The 3D premiums “are starting to backfire a little bit,” he added. And this pressure on the 3D price premium makes 3D less appealing for studios.
On the positive side is the very notable exception of IMAX cinemas, which continue to show strong growth globally, and which are generally held to deliver strong value for its price premium (see figure 10). Steven Spielberg told a group of journalists*: “I am certainly hoping that 3D gets to a point where people do not notice it. Because once they stop noticing it, it just becomes another tool and helps tell a story. Then maybe they can make ticket prices comparable to a 2D movie and not charge such exorbitant prices just to gain entry into a 3D one, with the exception of IMAX – we are getting a premium experience in a premium environment.”
In the US, growth potential seems limited in the short term, as the film‑screen digitisation phase is coming to an end.
*Source: http://movies.about.com/od/theadventuresoftintin/a/steven-spielberg-peter-jackson-interview.htm
33D entertainment 2012
Another positive development in 3D is the strong performance abroad of 3D films from the US studios (see figures 11, 12 and 13). The critical markets for US studios outside the US had strong years in 2011, and the 3D price premium held up, though much more so on IMAX screens.
China, now the world’s second-biggest film market after the US, has a growing middle class that enjoys a night out. And China is taking steps to encourage 3D growth. For years, China limited the number of foreign films that could be shown in China each year to 20. It recently agreed to increase that to 34, provided the additional 14 films were shown in 3D or large format.
The Chinese are also encouraging co‑production; films made by Hollywood studios with a Chinese partner do not count against that total.
Outside China, the share of box‑office revenues generated by 3D remains relatively high, except in the US
In the medium term, another cause for optimism is that some of the biggest names in film‑making – Martin Scorcese, George Lucas, Steven Spielberg or Peter Jackson, along with James Cameron – have committed to 3D. Scorcese’s ‘Hugo’ was released in late 2011, and Scorcese was pleased with the result and said he would direct more 3D films; Jackson’s ‘The Hobbit’ will be released in late 2012.
Just as encouraging for 3D is the emergence of an increasingly solid 3D production and post-production ecosystem in the US demand continues to grow for skilled 3D professionals; one service provider said that more than half of all demand for film professionals involves 3D. So people are being trained, and they are finding work.
So what lies ahead for the 3D film industry? The number of 3D films released has stabilised, with the number of 3D films announced and planned for 2012, comparable in number to those released in 2011 (see figure 14).
The disappointments of 2011 have created risk aversion. One lesson learned is that 3D does best when it concentrates on animation, or on established franchises. As a result, we will see ‘The Amazing Spider-Man’, a reboot of the ‘Spider-Man’ franchise, as well as Jackson’s ‘The Hobbit’, both likely to build on the strong track record of their predecessors. We will also see 3D re-releases of films including ‘Beauty and the Beast’ and ‘Star Wars: Episode 1’. In contrast, original live action films are not likely to flourish (see figure 15).
Development of 3D films in 2011 was sharply mixed with disappointing US box‑office figures for 3D films and pressure on 3D ticket premiums partially balanced by a growing number of 3D screens and strong international box‑office results.
4 Waiting for the next wave
Figure 1: 3D film screens (in units)
0
5,000
10,000
15000
20,000
25,000
30,000
35,000
40,000
US/Canada EMEA Asia Pacific Latin America
2007 2008 2009 2010 2011
CAGR 2009-11(in%)
+99%
+137%
+126%
+82%
+69%
35,479
22,411
9004
2,5361,297
Source: MPAA, IHS Screen Digest, PwC analysis
Figure 2: Cinema screens by format (2011, in units)
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
Analog Digital non-3D Digital 3D
US/Canada EMEA Asia Pacific LatinAmerica
14,921
13,774
13,695
19,977
7,592
11,642
18,285
5,769
8,116
7,873
2,026
Source: MPAA, IHS Screen Digest, PwC analysis
Figure 3: Cinema screens by format (2011, in %)
0
20
40
60
80
100
Analog Digital non-3D Digital 3D
US/Canada EMEA Asia Pacific LatinAmerica
- 50% of digital
screens
- 60% of digital
screens
35%
32%
32%
51%
19%
30%
57%
18%
25%
79%
1%
25%
Source: MPAA, IHS Screen Digest, PwC analysis
53D entertainment 2012
Figure 4: Films released in 3D among Top 20 grossing films in the US
2007 2008 2009 2010 2011
1 Spider‑Man 3 Dark Knight Transformers 2 Toy Story 3 Harry Potter 7 – Part 2
2 Shrek the Third Iron Man Avatar Avatar Transformers
3 Transformers Indiana Jones 4 Harry Potter Alice in Wonderland Twilight – Breaking Dawn 1
4 Pirates of the Carib. Hancock Up Iron Man 2 Hangover 2
5 Harry Potter WALL‑E Twilight – New Moon Twilight: Eclipse Pirates of the Caribbean
6 Bourne Ultimatum Kung Fu Panda Hangover Inception Fast Five
7 300 Madagascar Star Trek Harry Potter 7– Part 1 Cars 2
8 Ratatouille Twilight Blind Side Despicable Me Thor
9 I Am Legend Quantum of Solace Monster vs. Aliens Shrek 4 Rise of Planet of the Apes
10 The Simpsons Horton Hears a Who Ice Age – 3 Harry Potter 7 – Part 2 Captain America
11 Wild Hogs Sex & the City X‑Men Origins How to Train Your Dragon
The Help
12 Alvin and the Chipmunks
Mamma Mia! Night at the Museum 2 Karate Kid Bridesmaids
13 Knocked Up Juno Proposal Tangled Kung Fu Panda 2
14 National Treasure 2 Chronicles of Narnia 2012 Clash of Titans X‑Men First Class
15 Rush Hour 3 Incredible Hulk Alvin and the Chipmunks 2
Grown Ups Puss in Boots
16 Live Free or Die Hard Wanted Fast & Furious Megamind Rio
17 Fantastic Four Get Smart GI Joe Last Airbender The Smurfs
18 American Gangster Four Christmases Paul Blart: Mall Cop Tron: Legacy Mission Impossible: Ghost Protocol
19 Bee Movie Tropic Thunder Taken Shutter Island Sherlock Holmes 2
20 Night at the Museum Bolt Sherlock Holmes The Other Guys Super 8
Key Displayed in 2D and 3D 1 2 11 10
Source: PwC analysis
6 Waiting for the next wave
Figure 6: Share of 3D box‑office revenues for animation films (opening weekend in the US)
0
10
20
30
40
50
60
70
80
Chi
cke
n Li
ttle
Mon
ste
r Hou
se
Me
et t
he R
obin
sons
Cor
alin
e
Mon
ste
rs v
s A
liens Up
How
to
Trai
n Y
our
Dra
gon
Shr
ek
Fore
ver A
fte
r
Toy
Sto
ry 3
De
spic
able
Me
Alp
ha &
Om
eg
a
Me
gam
ind
Tang
led
Yog
i Be
ar
Gno
me
o &
Jul
iet
Mar
s N
ee
ds
Mom R
io
Fu P
and
a 2
Car
s 2
Sm
urfs
Pus
s in
Boo
ts
Clo
udy
with
a C
han
ce o
f...
Weighted 2010 average (animation): 67%Weighted 2011 average (animation): 53%
2009 2010 2011
Source: PwC database and analysis
Figure 7: Share of 3D box‑office revenues for live action films* (opening weekend in the US)
0
10
20
30
40
50
60
70
80
90
Jour
ney
to t
he C
ent
er o
f th
e...
G-F
orce
Ava
tar
Alic
e in
Won
de
rland
Cla
sh o
f the
Tita
nsTh
e L
ast A
irbe
nde
rC
ats
& D
ogs
2Le
ge
nds
of G
a'H
oole
Nar
nia
Tron
Gul
live
r's
Gre
en
Hor
net
San
ctum
Thor
Pira
tes
4G
ree
n La
nte
rnTr
ansf
orm
ers
Har
ry P
otte
rC
apta
in A
me
rica
Con
anS
py K
ids
Dol
phin
Tal
e3
Mus
kete
ers
Weighted 2010 average (other live action): 65%Weighted 2011 average (other live action): 52%
2010 2011
*except Horror and Concert/Dance films
Figure 5: US/Canada box‑office revenues (in US$ bn)
1.12.2 1.8
9.1 9.5 9.49.5
8.4 8.4
-18%
3D 2D
0.20
2
4
6
8
10
12
2006 2007 2008 2009 2010 2011
Source: MPAA, IHS Screen Digest, PwC analysis
73D entertainment 2012
Figure 8: Share of 3D in terms of box‑office revenues and cinema screens
0
20
40
60
80
100
0 20 40 60 80 100
2009
0
20
40
60
80
100
0 20 40 60 80 100
2010
0
20
40
60
80
100
0 20 40 60 80 100
H1 2011
Share of 3D screen (%)
Sh
are
of 3
D B
O re
venu
es (%
)
Share of 3D screen (%) Share of 3D screen (%)
BO to screen ratio2009 average =
1.38
BO to screen ratio2010 average =
1.09
BO to screen ratioH1 2011 average =
0.90
Number of 3D
screens
Number of 3D
screens
Number of 3D
screens
Source: MPAA, IHS Screen Digest, PwC analysis
Figure 9: Difference between standard 3D and a 2D ticket price in 2010 and 2011 (in %)
11
26 37
50
22 20
0
20
40
60
80
100
120
140
Moscow Tokyo London New York
26
60
60
0
20
40
60
80
100
120
140
55
37
61
136
2222
41
2011 (%)2010 (%)
Moscow Tokyo London New York
2011 (%)2010 (%)
(%)
(%)
�
�
�
�
Source: Dodona Research, PwC analysis
Figure 10: Difference between an IMAX 3D and a 2D ticket price in 2010 and 2011 (in %)
11
26 37
50
22 20
0
20
40
60
80
100
120
140
Moscow Tokyo London New York
26
60
60
0
20
40
60
80
100
120
140
55
37
61
136
2222
41
2011 (%)2010 (%)
Moscow Tokyo London New York
2011 (%)2010 (%)
(%)
(%)
�
�
�
�
Source: Dodona Research, PwC analysis
8 Waiting for the next wave
Figure 14: Main digital 3D film releases in the US
6 815
24
38 39
0
5
10
15
20
25
30
35
40
45
2007 2008 2009 2010 2011 Announcedin 2012
Source: PwC database and analysis
Figure 11: 3D box‑office revenues (in US$ bns)
1.12.2
1.4
3.9
0
1
2
3
4
5
6
7
2009 2010
+100%
+180%
US/Canada International
Figure 12: MPAA Box‑office revenues (in US$ bns)
US/Canada International
9.6 9.6 10.6 10.6 10.2
16.6 18.1 18.8 21 22.4
0
5
10
15
20
25
30
35
2007 2008 2009 2010 2011
Figure 13: Share of 3D box‑office revenues (in % of box‑office revenues)
60
46 45
40
7067
60
53
80
7067 68
0
10
20
30
40
50
60
70
80
90
Thor Pirates of theCarribean
KungFu Panda 2 Cars 2
US/Canada (%) International (%) Europe (%)
(%)
Source: Dodona Research, PwC analysis
93D entertainment 2012
Figure 15: 3D film listing for 2012 as of 31/12/11
January 2012
Beauty and the Beast 3D
Underworld: Awakening
February 2012
The Woman in Black
Journey 2: The Mysterious Island
Star Wars: Episode I – The Phantom Menace
Ghost Rider: Spirit of Vengeance
March 2012
Dr. Seuss’ The Lorax
Mirror Mirror
Wrath of the Titans
April 2012
Dorothy of Oz
Titanic
The Cabin in the Woods
May 2012
The Avengers
Men in Black III
June 2012
Madagascar 3: Europe’s Most Wanted
Prometheus
June 2012
Abraham Lincoln: Vampire Hunter
Brave
July 2012
The Amazing Spider‑Man
Ice Age 4: Continental Drift
Step Up 4
September 2012
Dredd
Hotel Transylvania
October 2012
The Texas Chainsaw Massacre 3D
Halloween 3D
November 2012
Wreck‑It Ralph
47 Ronin
Gravity
Rise of the Guardians
December 2012
The Hobbit: An Unexpected Journey
Life of Pi
The Great Gatsby
Other announcements in terms of 3D remakes
Blade Runner
Top Gun
Finding Nemo
The Killer
Some directors have announced that they will be only working on 3D projects
James Cameron
Ridley Scott
3D release of 2D film
Franchise
Source: Boxofficemojo.com
10 Waiting for the next wave
3D television
The world of 3D television is also full of sharp contrasts. Persuading consumers to purchase 3D sets 2011 proved to be little problem in 2011. In fact, consumers have been buying 3D TVs at a far quicker pace than they initially bought high‑definition television sets – 3D TV has enjoyed one of the fastest ever adoption rates for new consumer electronics (see figures 16 and 17).
This growth is taking place worldwide, with particularly strong sales in Europe and in China (see figure 18). There are three main reasons for this fast adoption.
First, most manufacturers and retailers emphasise that these 3D sets are “future‑proof” – emphasising the flat screen, high‑definition and ability to connect to the internet, as well as the 3D‑ready technology. Samsung, for example, offers more than 20 features in its 8000 Smart 3D LED TV line (note that the name does include 3D). This gives the sets a broader appeal. In other words, consumers are not buying 3D TVs but future‑proof TVs.
Second, the 3D TVs are sold at a small price premium. That premium varies from market to market, but is as low as 8% for some 3D TV models in Europe.
Third, consumers have a great deal of choice. More than 80 3D TV models are currently available.
Not only are sales strong, but the reaction from consumers has been quite positive (though we note that early adopters are generally enthusiastic about new technology they
purchase). These findings have been reinforced by market surveys and feedback from 3D TV channels: once people try 3D TV they tend to appreciate the 3D TV experience.
This relatively high level of satisfaction among 3D TV owners is also reflected in their buying intentions and their plans for additional 3D viewing (see figures 19, 20, 22 and 23).
Yet, if you think of 3D TV as something more than a piece of hardware – that is, if you expect 3D TV to present programming – the outlook is far murkier and the prospects uncertain.
On the one hand, in 2011, 39 3D channels were launched worldwide (see figure 24). The amount of 3D programmes broadcasted is however highly variable from one project to the other.
On the other hand, so far this 3D TV programming has limited appeal to consumers. Most 3D programming is not innovative, broad, or deep. Rather, the channels tend to repeat the same programme frequently (demonstrating how little 3D inventory is available).
In addition, 3D programming, where available, is by subscription only. In most cases, it is simply one more channel added to a premium package of programming. This approach is unlikely to change in the short term. No persuasive business case has yet been advanced for a stand-alone 3D TV channel – not in the short term, not in the medium term. Broadcasters and programmers recognise, quite properly, that 3D TV is not likely to be a profit centre, but rather a cost centre, for years to come.
113D entertainment 2012
So why launch a 3D TV channel? Our interviews confirm that most players are doing it either to differentiate themselves from competitors, or to reward their subscribers with the highest average revenue per user, increasing the perception of value for money.
People may indeed be willing to watch in 3D, but they must not only own the appropriate TV set, but have access to the programming service and be willing to pay for it (see figure 25). It is important to understand that currently the main barriers to 3D TV adoption are primarily related to the level of subscription to HD pay‑TV packages; ownership of a 3D TV is a lesser concern.
Note, too, that the barriers to 3D TV differ significantly from one country to another. While we anticipate that most barriers to 3D TV adoption should decrease by 2016, a great deal of uncertainty remains on the availability and attractiveness of 3D TV channels – and when, if ever, a global market will arise.
One obvious source for 3D TV programming is the world of sport. The 2012 Olympic Games in London in July and August will be made available in 3D. While FIFA 2010 was also available in 3D, it did not generate a strong demand for 3D TVs. It will be interesting to see if the greater 3D TV home penetration will generate more appetite from the consumers.
As a result of this lack of 3D programming, most 3D TV viewing is non‑linear, heavily dependent on Blu‑ray. Indeed, most customer expectations for 3D video content can be fulfilled by Blu‑ray, and the number of Blu‑ray titles available continues to increase sharply. In 2011, 108 3D Blu‑ray titles were published globally, compared with 37 in 2010 (see figure 26).
Another possible source of 3D programming is video on demand (VOD). Last year, Samsung announced that it would offer VOD with its Smart 3D sets, starting with a small ‘sampling menu’ and then perhaps growing into a more robust fee‑based system. But that has not yet developed. Sky and the DISH Network also announced in 2011 that they were preparing for VOD, but developments have been limited.
So like 3D film, 3D TV is also awaiting the next wave.
Broadcasters and programmers recognise, quite properly that 3D TV is not likely to be a profit centre, but rather a cost centre, for years to come.
12 Waiting for the next wave
Figure 16: Sales of new TV technology in France since launch (in ‘000s of units)
9 71478
2,015
5,175
9,028
13,049
16,535
19,182
120 9392,288
4,092
6,526
9,420
13,087
0
5,000
10,000
15,000
20,000
25,000
0 1 2 3 4 5 6 7 8 9 10 11 12
Year
13
3D TVs HD TVs
Source: Screen Digest, GfK, PwC model, PwC analysis
Figure 17: LCD TV panel shipment shares by type and 3D TVs as % of TV shipped
0
10
20
30
40
50
60
70
80
90
100
10% on average in 2011
3D2D
(%)
Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12e Q2 12e Q3 12e Q4 12e
Source: NDP Display Search, PwC analysis
Figure 18: 3D TVs as % of TV shipped
0
5
10
15
20
2010 Q4 2011 Q1 2011 Q2 2011 Q3
N. A
mer
ica
Jap
an
W. E
urop
e
E. E
urop
e
Asi
a P
acifi
c
LatA
m
ME
A
Wor
ldw
ide
Chi
na
(%)
Source: Screen Digest, GfK, PwC model, PwC analysis
133D entertainment 2012
Figure 19: 3D TV buyers’ perception of viewing quality, content and experience
9591 89
62
0
10
20
30
40
50
60
70
80
90
100
(%)
Overall picture quality
Picture quality of 2D
programming
Picture quality of 3D
programming
Sound quality
Source: Strategy Analytics ( Q3 2011), DEG (Q1 2011), PwC analysis
Figure 20: 3D TV buyers’ opinion on 3D content and experience (Q3 2011, Europe 5, 208 respondents)
0
10
20
30
40
50
60
70
80
90
100
Neither agree nor disagree DisagreeAgree
(%)
In general the quality of the 3D experience has been very good
Watching too many shows in 3D makes me
feel sick
The variety and choice of
TV shows available in 3D is very good
If it was possible I would like to
watch every TV show in 3D even
with glasses
Source: Strategy Analytics (Q3 2011), DEG (Q1 2011), PwC analysis
Figure 21: 3D TV buying intentions and recommendations
4.2 3.9 3.52.1 1.4
12.5
7.66.8
6.9
5.5
0
2
4
6
8
10
12
14
16
18
Italy US France Germany UK
Somewhat likely (%)Very likely (%)
(%)
Source: Strategy Analytics (Q3 2011), DEG (Q1 2011), PwC analysis
Figure 22: 3D TV buying intentions and recommendations
No, probably
not6%
No, definitively
not1%
Yes,definitively
55%
Probably25%
Might ormight not
14%
Source: Strategy Analytics (Q3 2011), DEG (Q1 2011), PwC analysis
14 Waiting for the next wave
Figure 24: Main existing and announced 3D TV channels
Foxtel 3D
CNTV
ESPN 3D3netxfinity 3Dn3D DirectDirect CinemaMSG
OrangeMa Chaine 3DNri 12 3DMyZen.TV
OrangeCanal+3D
Existing 3D TV channels
Sky 3D
Viasat 3D
Sky 3D
Sky 3DAnixe3D The Channel
3D by Panasonic
TelewizaNext 3D Canal+3D
S3DBS11
Smart 3DTeledunya
EuropeEurosportHustler HDBravaPenthouse 3D
WorldWildearth.TV.3D3D High TV
Sky 3D
HD+
HD1
Announced 3D TV channels
Source: PwC
Figure 23: Viewing habits of 3D TV users – US and Europe
I'd watch mostthings in 3D
39%
It would be an
even split23%
Viewing habits of 3D TV users (US, Q1 2011, 3,065 respondents)
At least once a week
27%
At least once
a month14%
Rarelyor never
18%
3D TV owners viewing habits (Europe 5, Q3 2011, 238 respondents)
I’d watch everything in 2D
0%
I'd watcheverything
in 3D27%
I'd watchmost things
in 2D 14%
At least once a day
26%
Severaltimes a day
15%
Source: Strategy Analytics (Q3 2011), DEG (Q1 2011), PwC analysis
“Approximately 70% of people who watched our 3D TV Channel, are viewing other 3D content within the next 7 days. Our main issue is to get them to try it”A manager of a 3D channel
“1 million 3D VoD viewed on Samsung free 3D VoD portal during the first 100 days”Samsung
153D entertainment 2012
Figure 25: Barriers to broadcast 3D TV in 2011 (in % of HH)
0 10 20 30 40 50 60 70 80 90 100
TV HH
Pay-TV barriers
TV HH
Pay-TV subscription
HD Pay-TV subscription
3D-ready TVownership
Broadcast3DTV usage
Pay-TV HH
HD enabled pay-TV HH
Broadcast 3DTV enabled HH
Active broadcast 3DTV HH
Pay-TV HH
HD pay-TV HH
Broadcast 3DTVenabled HH
Active broadcast3DTV HH
Spain Slovakia Poland USA France Japan
Barriers to broadcast 3D TV in 2011 (in % of HH)
3DTV equipment barrier
3DTV content barrier
Source: ScreenDigest, PwC model, PwC analysis
Figure 26: Number of 3D Blu‑rays’ titles made available worldwide
7
35
42 14
19
33
18 25
13 18
9 10
14 17
0
20
40
60
80
100
120
140
160
2010 2011 Total 3D DVDs available
Animation Documentary Live action Live performance Horror Other
37
108 145
35
7
Source: PwC analysis
16 Waiting for the next wave
Other 3D screens
While we see the possibilities of innovation and long‑term potential in 3D beyond film and television, just how this may play out is uncertain.
A large installed base of 3D‑ready gaming consoles is in place. Yet, consumer appetite for 3D games has been limited (see figure 27), and console manufacturers have turned their focus and resources to motion-capture games and programs – like Microsoft’s extremely successful Kinect – rather than 3D.
This trend is clear, despite the success of the handheld Nintendo 3DS. The Nintendo 3DS, with glasses-free 3D, was introduced in early 2011 – and, significantly, its price was cut later in the year. After a slow start, sales are reported to be strong. Yet, none of Nintendo’s rivals has announced plans to compete in this segment of the market.
Even though a number of home gaming consoles have 3D, the majority of 3D games being developed are for the Nintendo 3DS.
The autostereoscopic technology used in the Nintendo 3DS will eventually be developed for use in other, larger devices, but little hard evidence exists of when or where this will happen.
The cellphone market is another area where consumer appetite for 3D has not yet been determined. This segment is extremely limited now, because industry‑wide standards have not been established, so a 3D picture taken on one device cannot be viewed on another manufacturer’s devices. In Japan, five models of 3D phones are sold, four of them from Sharp. Worldwide, only three models are sold.
Given the lack of opportunities in this market to use 3D, little demand has surfaced, and no significant research appears to be under way because interest is so low.
The computer laptop market is similar. Models are increasingly offered as 3D‑ready, though this has not generated much excitement among consumers. Rather, the focus – among consumers, manufacturers and sellers – has been on tablets. This is not surprising, given the stunning commercial success of the iPad and the strong competition that is emerging from competitors.
Apple has been at the centre of many rumours involving 3D, particularly in the months before the third-generation iPad was introduced in April 2012. Industry speculation anticipated that the new model might incorporate 3D.
The new iPad is powered by an A5X chip, and reviewers say it is very fast at displaying complex 3D graphics in games. But games that take advantage of this technology are, at the moment, rare.
Apple-watchers also note that an application is already available for the earlier iPad 2 and the iPhone 4, which display 3D content. Apple has had little to say about its 3D intentions.
Other tablets are surely looking into 3D, as well.
As technology evolves we will see progress in 3D that does not involve special glasses. Some companies are at work on eye‑tracking systems that position objects on the screen in such a way that natural vision creates a 3D effect. To date, this capability has been demonstrated only on smaller screens, but surely this will change.
In the US, growth potential seems limited in the short term, as the film‑screen digitisation phase is coming to an end.
173D entertainment 2012
Toshiba has announced that it will offer a glasses‑free 55‑inch 3D TV set sometime in 2012, to be distributed in the UK at a price of £7,400. At that price, it is not likely to be a huge success. Samsung estimates that ten years are needed to develop a quality 3D glasses-free TV experience at a reasonable price.
We believe there is a high probability of success for glasses‑free 3D, especially in the tablet format, where consumer demand is so strong.
We note, too, that sales have begun to pick up in the consumer market for 3D cameras. People are taking 3D pictures of their weddings and their babies’ first steps. So it is reasonable to assume that such user‑generated content may become a driver of 3D growth.
How this might play out is uncertain. But we are all familiar with the power of user-generated content. So, in this hypothesis, more people will capture their images on 3D devices and make them available to others, many people will want to view them on phones or tablets (and perhaps on large screens), and demand for 3D devices of many sorts will rise. This might even be one way that 3D TV could expand its base.
Figure 27: Frequency of playing 3D games in Europe (in % of respondents who own a 3D console)
0
10
20
30
40
50
60
70
80
Never Just once A few times
Quite often
Very often
Xbox 360 PS3
(%)
Source: Strategy Analytics (May 2011), PwC analysis
In the same time, the success of motion detection has been very high
Kinect has been the fastest‑selling consumer product in history after three months
Microsoft announced ten million unit sales at the end of February 2011
18 Waiting for the next wave
3D screens’ penetration forecast
Overall, 3D entertainment awaits the next wave. Will there be an unexpected breakthrough, or a surprise? Could another stunning film emerge and have an Avatar‑like impact? That seems more likely than a surprise in the 3D television sector.
3D films A resumption of growth of 3D films requires the production of quality 3D films. Whether 3D box‑office returns, or expectations that they will improve will incentivise sufficient production and a commitment to quality remains to be seen.
We anticipate the following:
• Most animation and horror films will be released in 2D and 3D.
• Franchise films – e.g. Spider‑Man, Harry Potter, Pirates – and animation will dominate 3D.
• The conversion of historical blockbusters to 3D will continue. The success of James Cameron’s Titanic in 3D, released in April 2012 to coincide with the 100th anniversary of the tragedy, demonstrates a new the power of excellent 3D to generate business.
We anticipate that the premium for 3D films will be more flexible in the future and must fall from current US levels to appeal to consumers.
• The production of 3D films in Europe, China and Japan will increase, though remaining relatively limited.
• The incremental production costs of 3D will continue to deter some film‑makers. While some prominent directors – Peter Jackson, Martin Scorcese – are now working in 3D, the main barrier to 3D will continue to be its adoption by other directors.
• The debate about the optimum environment to watch (and produce) a 3D film – IMAX, 4k (a reference to an image width of 4,096 pixels), frame rate and so on – and the 3D ticket premium should continue in the years to come.
• The share of 3D films on the top-grossing movie lists should stabilise.
• The adoption of digital distribution is expected to reach 100% among the multiplex and large urban theatres in the medium term, with more limited adoption among small cinemas. Whether and how much this will increase cinema revenue is uncertain.
3D TVFor a breakthrough in television, an eyeglass‑free technology at an attractive price is needed. That is not yet in sight. As noted previously, Samsung estimates that it will take ten years to develop a quality 3D eyeglass‑free TV experience at a reasonable price.
193D entertainment 2012
Consumers are buying 3D TV sets, and they are using them mainly to watch films and other programmes on DVD. Our scenario for the availability of 3D TV content anticipates the following:
Video games: • Game-makers and console-makers
are expected to continue to focus on motion capture rather than on 3D.
• Most 3D games are directed to handheld devices, particularly the Nintendo 3DS.
Home video: • More films are becoming available
on 3D DVD and Blu‑ray.
• 3D video on demand will develop, but should remain limited.
TV: No case can be made for the emergence in the short term of a full ecosystem for 3D programming.
• The main 3D programmes that will be broadcast will be limited to live events, such as premium sporting contests and concerts, and those will continue to be accessible only through subscription packages.
• The adoption of 3D by other categories of TV content is likely to remain limited.
• The number of models of 3D TV sets will continue to increase and prices will continue to fall.
• All high-end and most medium-end connected TV models will be 3D‑ready in the medium term.
• We anticipate a worldwide 3D TV promotional campaign in 2012 for the Olympics in London, but insufficient access to the programming will limit its influence.
3D mobile phonesThe development of 3D mobile phones is expected to be shaped by:
• The incremental benefits provided by 3D photos and 3D games.
• The lack of interoperability among the different standards – a 3D picture captured by one model cannot be displayed on a 3D model from a different manufacturer.
Demand continues to grow for skilled 3D professionals; one service provider said that more than half of all demand for film professionals involves 3D.
20 Waiting for the next wave
Figure 28: 3D film screen penetration forecast %
21%
30%
41% 48% 52%
56%56%
10%
21%
30%36% 39% 42% 43%
-10% 0%
10% 20% 30% 40% 50% 60% 70%
20% 31%
42% 45% 47% 48% 49%
8% 20%
31%36% 38% 39%
40%
-10%
0% 10%
20%
30%
40%
50%
60%
70%
22%
30%
39% 49% 55%
61%64%
9%
22%30%
35%39% 42%
44% 46%
-10%
0% 10%
20%
30%
40%
50%
60%
70%
44%
53% 58% 61% 61% 61%
10%
44% 44% 45% 45% 44% 43%
-10% 0%
10% 20% 30% 40% 50% 60% 70%
10% 13%15%20%
25%
36% 44%
10% 13% 14% 16% 19% 24%
28%
-10%
0% 10%
20%
30%
40%
50%
60%
70%
2% 3%5% 5% 6% 6% 6%
0% 2% 3% 4% 4% 4% 4%
5% -10%
0% 10%
20%
30%
40%
50%
60%
70%
Europe 5
Low case High case
43%
28%28%
39%
4%
Europe 5 US Japan
China Brazil India
Source: PwC model
Figure 29: 3D‑ready TV penetration forecast%
11% 19%
29% 41%
55%
8% 13%
19%25%
33%
2010 2011 2012 2013 2014 2015 2016
10%
18%
30%
42%
58%
2% 6%12%
18%25%
34%
2010 2011 2012 2013 2014 2015 2016
3%6%
9% 12% 16%
2% 4%6% 7% 9%
10%
13%
22%
34%
47%
62%
4%
9%15%
22% 29% 37%
2010 2011 2012 2013 2014 2015 2016
2% 7%
13%
20% 28%
0% 2% 5%9% 12% 17%
2% 6%10%
15% 20%
0% 2% 4%7% 10% 12%
Europe
0%
10%
20%
30%
40%
50%
60%
70%
0%
10%
20%
30%
40%
50%
60%
70%
3% 0%
10%
20%
30%
40%
50%
60%
70%
2010 2011 2012 2013 2014 2015 20160%
10%
20%
30%
40%
50%
60%
70%
2010 2011 2012 2013 2014 2015 20160%
10%
20%
30%
40%
50%
60%
70%
2010 2011 2012 2013 2014 2015 2016
0%
10%
20%
30%
40%
50%
60%
70%
-
Europe 5 US Japan
China Brazil India
Low case High case
Source: PwC model
213D entertainment 2012
Figure 30: 3D‑ready mobile phone penetration forecast
0% 1% 2%4%
8%
0% 0% 0% 1% 2%4%
0% 2% 3%
7%
12%
0% 0% 1%2% 3%
6%
0%
2 % 6%
0% 0% 1%
3%
7% 11%
0% 0% 0% 1% 2% 0% 0% 0% 1% 1%
0% 0% 1% 2% 3%
0% 0% 0% 0% 1% 1%
0%
0%
5%
10%
15%
20%
25%
30%
2010 2011 2012 2013 2014 2015 2016
0%
5%
10%
15%
20%
25%
30%
2010 2011 2012 2013 2014 2015 20160%
5%
10%
15%
20%
25%
30%
2010 2011 2012 2013 2014 2015 2016
0%
5%
10%
15%
20%
25%
30%
2010 2011 2012 2013 2014 2015 2016
0%
5%
10%
15%
20%
25%
30%
2010 2011 2012 2013 2014 2015 2016
0%
5%
10%
15%
20%
25%
30%
2010 2011 2012 2013 2014 2015 2016
14%
22%
0% 0%0% 0%0%
0% 0%0% 0%0%
Europe 5 US Japan
China Brazil India
Low case High case
Source: PwC model
22 Waiting for the next wave
Key questions There is no shortage of uncertainty.
Film producers• Rhythm of 3D adoption by film
directors
• Magnitude of the 3D opportunity/Sustainability of 3D ticket premium
• Extension of 3D to new movie genres (comedy, drama, adventure, thriller)
• Should 3D movies be filmed with a higher frame rate?
Cinemas• Sustainability of the 3D ticket
premium
• Potential of variable premiums
• Can 4k screens justify a 3D ticket premium?
• Potential of non‑film theatrical exhibition
TV Network• Formats of 3D TV channels
(appointment‑to‑view, 24/7 linear channels, on demand)
• Type of content
• Business model
• Access to 3D stocked content
• Potential of 2D/3D conversion
Pay‑TV distributors• Business model
• Broadcasting technology
• Linear or non-linear offer
• Can 3D reactivate the pay‑per‑view model
Consumer electronics manufacturers• Product strategy
• Pricing strategy
• Potential of autostereoscopic TV
• Competitive strategy
Games studios• 3D adoption by flagship game titles
• Lessons of the Nintendo 3DS experience
• Potential of 3D streaming games
Game console manufacturers • Next-generation console features
• Timing for next-generation consoles introduction
• Investment in 3D games
Internet companies• Potential of 3D user-generated
content
• Potential of 3D online content (mass market and professional)
PwC provides benchmarks and models to help lessen the uncertainties, asking provocative questions along the way to help companies define and implement their strategies.
233D entertainment 2012
24 Waiting for the next wave
Entertainment and Media contacts
Editor in Chief Vincent Teulade [email protected]
Global Marcel Fenez [email protected]
North AmericaCanada Tracey Jennings [email protected]
United States Kenneth Sharkey [email protected]
EMEAWestern EuropeAustria Bernd Hoffman [email protected]
Belgium Eddy Dams [email protected]
Denmark John Gabriel Sørensen [email protected]
Finland Harri Valkonen [email protected]
France Matthieu Aubusson de Cavarlay [email protected]
Germany Werner Ballhaus [email protected]
Greece Dinos Michalatos [email protected]
Ireland Paul O’Connor [email protected]
Italy Andrea Samaja [email protected]
Netherlands Ennel van Eeden [email protected]
Norway Eivind Nilsen [email protected]
Portugal José Vitorino [email protected]
Spain Virginia Arce [email protected]
Sweden Nicklas Kullberg [email protected]
Switzerland Patrick Balkanyi [email protected]
United Kingdom Phil Stokes [email protected]
Central and Eastern EuropeCzech Republic Jiri Moser [email protected]
Hungary Manfred Krawietz [email protected]
Poland Adam Krason [email protected]
Romania John Webster [email protected]
Russia Natalia Yakovleva [email protected]
Turkey Murat Colakoglu [email protected]
253D entertainment 2012
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Design & Media – The Studio 21179 (07/12)
Middle East/AfricaIsrael Eran Iohan [email protected]
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Asia PacificAustralia David Wiadrowski [email protected]
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