3-D’s Grand Entrance

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 3-D TV displays, as two programmers and a distributor promised to provide the content to satisfy the early flush of consumer ardor. On Jan. 5, ESPN and Discovery Communications unveiled plans to launch dedicated 3-D networks, twin initiatives that would be subsidized in part by Sony Corp. The following afternoon, DBS operator DirecTV took the wraps off its 3-D blueprint, a pay-per-view channel backed by Panasonic.

The debut of ESPN 3-D will coincide with the start of the 2010 FIFA 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 3-D channel up and running in time to carry Fox Sports’ broadcast of the 2010 Major League Baseball All-Star game, which will be played in Anaheim, Calif., on July 13.

While all three ventures promise a wealth of 3-D programming, analysts said the early enthusiasm for the format is a case of the tail wagging the dog. “With 3-D, you’re talking about a hardware cycle,” said Barclays Capital media analyst Anthony DiClemente. “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.”

At the moment, fewer than 1 million of the country’s 114.9 million TV homes boast a set that can display 3-D content, per Consumer Electronics Association estimates. However, given the industry’s yen to breed and feed off an almost entirely new product category, 3-D penetration is expected to metastasize in the next several years. The CEA projects sales of 4.3 million 3-D 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 percent. “We saw a similar phenomenon with HD. Until Discovery launched its HD channel in 2002, there really wasn’t any high-def programming available,” Leichtman said. “So for four years there really wasn’t any reason to buy HD sets, which also happened to be incredibly expensive.”

The adoption of 3-D 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 percent.) 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 3-D 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 3-D channels will be managed accordingly. Sony’s agreement with ESPN gives the CE giant an apposite platform from which to market its new high-def 3-D sets, while helping defray the costs of producing the 85 live events Bristol will offer in the format. Per terms of the deal, Sony will be the exclusive 3-D 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 3-D. “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 3-D; it really has the potential to transform advertising. Think of the cool things you can do with automotive. Just imagine.”