I’ve spent the day with Panasonic’s European marketing team and other analysts discussing the future of 3D. The debate ranged from technical issues such as passive v. active and full v. half HD, content production challenges, and marketing in-home 3D products to consumers. Panasonic is a leading light in the drive to develop a 3D home video standard based on Blu-ray Disc technology. While nothing can yet be publicly announced it seems as though things are progressing well and that announcements should be expected in the not-too-distant future. We were also given demonstrations of 3D content from a specially adapted BD player, on a Panasonic 103” plasma using active glasses. I had seen much of this content before, although some new clips confirmed the system’s potential. Once again the Olympics material was most impressive, although Panasonic did not use some of the best clips I had previously seen. The discussion of content production led to a debate around intraocular distance as a key determinant in viewer satisfaction at the 3D experience. It was suggested that since many of the now-familiar 3D movies have been targeted at the children’s market, that the 3D aspect of the movie has been tailored towards the smaller distance between children’s eyes rather than those of adults, and that this is one explanation why adults may see a less satisfactory 3D effect than children. If this is indeed the case, it would seem to be another barrier that the emerging 3D market will have to overcome, if certain pieces of content can only be viewed satisfactorily by certain age groups, or, more precisely, those with particular interocular characteristics. Much of the discussion centered on competition between emerging 3D providers, not least broadcasters like BSkyB, which recently announced its intention to launch 3D content in 2010. There will inevitably by differences in the technology strategies across these different platforms, and the challenge for all players is to minimise the potential confusion which results. This will be particularly vital in the area of 3D-ready TVs. As I indicated previously, such products have not really begun to reach the European markets yet, unlike in the US. But when they do (expect European marketing to start in earnest in 2010) communication to consumers will have to be crystal-clear on which 3D content will play successfully on which 3D-ready TVs. Sky will surely be pushing its own “standard” and labelling, and that is likely to encourage others to tell their own stories. As I announced before, Sky does not care about any 3D standards debate. I’m not pessimistic about 3D in general. It will certainly penetrate home markets (TV, video, games) in various ways over the coming years. But the danger, as always, is that the opportunity will not be maximised if industry players focus on their own narrow interests rather than communicating clear, consistent messages to consumers. Twitter: twitter.com/DavidMercer_SA Client Reading: Digital Media Devices Global Market Report

Sony has finally gone public with its new PS3 slim form factor, and confirmed rumours that this device will also take the console to new price points - $299 and €299. The new PS3 is more compact and consumes less power than the original form factor, and upgrades the HDD to 120GB. While the new PS3 will still command a premium over the Wii and the Xbox 360, it is now positioned much more realistically. Research clearly indicates that many potential PS3 buyers have been put off by the higher price points and, rather than waiting, have chosen one of the rival consoles instead. The risk for Sony is that those buyers will now resist adding a second console, especially against a tough economic background. But as we move towards the key fourth quarter selling period the PS3 is now much better positioned to compete for gift spending, however constrained that may be this year. The move may have come too late for many tastes, but Sony’s console is also now back on track to maintain its momentum and sustain its own console cycle for the next few years. It will still struggle to regain its former position of market leadership, indeed dominance, but it has many years left to expand its PS3 user base, while Nintendo’s Wii in particular already appears to have peaked. Twitter: twitter.com/DavidMercer_SA Client Reading: Digital Media Devices Global Market Report

After another set of strong financials BSkyB has been showered with praise from financial and media commentators alike. As I indicated at the time, the vast majority of customers plan to keep spending – the same or more – on digital television, in spite of the economic gloom and uncertainty. Sky’s long established premium content and technology innovation strategies have apparently put the company into an invincible position. But delving further into our survey findings a Strategy Analytics report has revealed a key weakness in Sky’s competitive position. Satisfaction with the Sky service is generally strong, but Sky’s value for money ratings are the weakest of the major competitors. Overall we found that more than a third of Sky digital TV subscribers were less than satisfied with the value for money of this service, compared to a quarter of Virgin Media digital TV customers and only 7% of Freeview users. We also found significantly fewer customers of Sky, compared to those of Virgin Media or Freeview, who felt that value for money exceeded their expectations. Of course people could argue that we are comparing apples and pears, since Freeview by definition is a free-to-access service. Perhaps the few people who felt Freeview was not value for money thought that the price of the set-top box or TV set was too high. And it would certainly be interesting to rate Freeview against the value of the television licence fee (£142.50 annually), since most people probably do not associate the two as directly related. But as Sky itself recognises, Freeview does present a possible alternative for price-conscious TV viewers, even if Freeview’s range of content falls well short of what is available from Sky. And our survey suggests that Virgin Media, the other major pay TV competitor, has higher value for money ratings than Sky. This appears to be a sign of hope for the cable company as it seeks to become more aggressive in customer acquisition over the coming months. Twitter: twitter.com/DavidMercer_SA Client Reading: BSkyB Results Shine But Warning Signs Evident In Customer Value Ratings