3-D at home not the ticket it is in theaters

• 3-D in theaters is a solid draw%3B at home%2C not so much
• ESPN plans to nix its 3-D channel%2C leaving even less programming
• Advent of glasses-free 3-D may be key to larger home success

Despite ups and downs, 3-D has survived and at times thrived in movie theaters over — count 'em — seven decades.

But the plan that Hollywood and TV makers have for 3-D to become a fixture in the home is not playing out as scripted.

3-D has found its way into about 12 million U.S. homes, according to market tracking firm The NPD Group. TV makers have included it as a feature on mid- and higher-priced displays over the last three years or so. However, 3-D-ready TV sales are starting to slow and few use 3-D features regularly.

Even though many homes have 3-D TVs and are watching events and 3-D Blu-ray Discs, there are signs that the move to TV broadcasts in 3-D might have been premature. "It's not clear the case can be made for it in the short term," says Mary Shelton Rose, an advisory partner at PricewaterhouseCoopers.

Some of the momentum for 3-D was lost recently when ESPN said that by year's end it would scrap its ESPN 3D channel carried by several pay-TV providers. And just last week, the BBC announced that it was immediately shutting down its 3-D channel.

ESPN cited lack of consumer interest. "Really, the growth in 3-D in the home wasn't there. We had to make a decision," says ESPN's Katina Arnold.

Among events that ESPN had broadcast in 3-D were 2010 World Cup soccer matches, the Masters tournament, the X Games college football bowl games and this year's Wimbledon.

For now, ESPN plans to focus on its new experimental broadcast for the next wave of TVs — Ultra HD sets that boast four times the resolution of current HD.

ESPN's bowing out is a bad sign for home growth of the format, says Sweta Dash, senior director of display research and strategy at research firm IHS. "Sports events, gaming and movies are supposed to be the main drivers for 3-D TV," she says. "ESPN's announcement will push consumers to question the future of 3-D TV at home."

Last year, DirecTV and Panasonic decided to shutter the n3D channel that they had collaborated on. Instead, the TV provider continues to offer occasional 3-D events, pay-per-view 3-D movies such as Monsters Inc. and the 3net channel, a joint venture of Sony, Discovery and IMAX.

DirecTV is "always ready to provide more if demand increases," said DirecTV's Jade Ekstedt.

A BIG HIT IN THEATERS

In theaters, 3-D is event-driven. The biggest 3-D film ever was Avatar, which did about 80% of its $760 million revenue in 3-D sales, according to BoxOfficeMojo.com, and boosted 3-D box office revenue to $2.2 billion in 2010. The last two years have seen 3-D ticket sales stabilize at $1.8 billion in 2011 and 2012, even though last year saw fewer 3-D releases.

While theaters await the next big have-to-see-in-3-D event — Avatar 2 and 3 are expected to be shot next year — many tentpole films such as Man of Steel and World War Z are offered in 3-D along with 2-D. Typically, 3-D tickets make up about 40% of blockbuster films' box office, which means many moviegoers are opting to pay $4 to $6 more to see a film in 3-D.

"It looks like that is what the market will bear and what people will pay," says Jeff Bock of Exhibitor Relations.

With 3-D a solid segment of the theatrical ecosystem, Hollywood has released a steady stream of 3-D movies on Blu-ray Discs. As for broadcast 3-D, many entertainment industry insiders and observers question its relevance.

"3-D in the home has a lot of upside, but it's challenging," Shelton Rose says.

WATCHING THE BIG GAME

Home 3-D TV was meant to be event-driven, too, says Steve Koenig, director of industry analysis for the Consumer Electronics Association. Manufacturers began including 3-D as a built-in feature about three years ago, many including multiple sets of 3-D glasses with the TV. But the percentage of new TVs being shipped with 3-D is down this year, he says.

At home, viewers may watch a big game or event in 3-D, but they aren't going to constantly watch 3-D programming, Koenig says. That is a hard sell for advertisers, which are needed to keep broadcast 3-D channels alive. "It was hard to ever imaginethat consumers were going to come home and sit down on the couch, put on the glasses and watch TV all night in 3-D," he says.

TV makers were too quick to pin their hopes on 3-D as a selling point, says Nicholas Routhier, co-founder and CEO of Sensio, a Plainview, N.Y., company that streams 3-D movies on smart TVs. "3-D broadcast was way, way, way too early. The business model was not there," he says.

Instead, TV makers should have focused on promoting 3-D Blu-ray Disc movies at home. "That's a really terrific format, but they started subsidizing the cameras and subsidizing the FIFA World Cup and financing the whole 3-D broadcasting," he says.

It's uncertain how many homes actually watch the 3-D TVs they have. One barometer: Only 14% of consumers expect to buy a 3-D TV, down from 25% two years ago, NPD finds, and only half of fans are interested in watching 3-D events, down from 70% in 2011.

"Most consumers are watching predominantly in 2-D mode," IHS' Dash says, "due to lack of content as much as inconvenient technology," meaning the required 3-D glasses.

Some companies such as Stream TV are preparing to bring to market later this year 3-D TVs that do not require glasses. For now, "picture quality is still not up to consumers' expectation," Dash says.

And current glasses-required 3-D home viewing doesn't measure up to what viewers see in theaters. "That immersive experience that is captured in the theater is not quite there in the home," says Robert Jaffe, chief strategy officer at Prime Focus World, which converts new and older films to 3-D for theatrical release.

Among the Hollywood firm's recent works: 3-D conversions for World War Z and The Wizard of Oz, which will play in theaters for a week in September and be released on 3-D Blu-ray the next month.

HOME 3-D'S FUTURE?

Many releases such as The Avengers and The Hobbit come in multidisc combo packs with a standard Blu-ray Disc, DVD and digital copy in addition to 3-D Blu-ray, priced at $45-$50. At the end of 2012, more than 200 3-D Blu-ray movies were available, up from 108 in 2011, IHS says.

"ESPN truly was ahead of its time," Jaffe says. "We think there is tremendous benefit to in-home 3-D. It hasn't taken off for a variety of reasons. Will it translate to the home? We still believe the answer to that is yes."

So does Sensio, which currently has its 3DGo! movie-streaming service on board in Vizio 3-D smart TVs. It's working with other TV makers and also prepping its service for future glasses-free displays.

Like another Hollywood-created tech spectacle, the Terminator, 3-D just keeps coming back. "Some say 3-D never catches on," Sensio's Routhier says. "I'm actually more of the school of thought that 3-D never dies."