Followers of the industry will no doubt recall the unstoppable buzz at the 2010 CES Show in Las Vegas, where the story was 3DTV, and how it was poised to overtake the American living room. In the ensuing 12 months, though, it seems that much of the excitement around the technology has subsided?if not evaporated.

Indeed, we shared our views on the 3DTV opportunity at this year?s IBC in Amsterdam: essentially saying that consumer excitement around the technology was quite high, but that translating that enthusiasm into a viable business model would be a challenge. Our feelings in that regard haven?t changed substantively.

Content and the Indelicate Topic of Money

What we have seen in the past five months, however, has been a swift roll out of 3DTV programming worldwide. Two notable examples are 3net, the joint venture of Sony Corporation, Discovery Communications and IMAX Corporation, as well as ESPN?s announcement of its dedicated 3DTV channel.

Now Cable and Media behemoth Comcast has announced the launch of its 24/7 3DTV Xfinity 3D channel for next week, focusing, it says, on ?music, sports, movies and original programming.?

A crucial, and often over-looked, question is: who will actually pay for this? There are significant premiums associated with producing content in 3D compared to 2D. Our estimates based on industry interview set the premium in the range of 80% to 100%. In the theaters, it is the moviegoer who pays the premium to see the latest 3DTV release?indeed it is evident in the ticket price.

The question is, who pays at home?

Market for 3DTV: It?s The Cube Tubers

As we have pointed out in the past, our US consumer survey research and forecast modeling suggest only a relatively modest opportunity for 3DTV in the home. Overall, fewer than half of respondents showed a willingness or expectation to pay any premium for 3DTV.

We have, however, identified and isolated a group of consumers we believe to be most likely to actively view (and more importantly, pay for) 3DTV services.

This group of individuals, whom we dub ?Cube Tubers,? represents between 8%-10% of the overall population. Cube Tubers are unique in their intentions to purchase a 3DTV in the upcoming year, and to be active premium/HD customers.

Compared to overall survey respondents, Cube Tubers exhibit a much higher interest in receiving 3DTV programming at home, with 74% saying they are ?somewhat? or ?very? interested, compared to 36% in the overall sample. Likewise, they were significantly more likely to expect to pay some sort of monthly or one-off premium than the general sample.

Content aside, 3DTV still faces an uphill battle in other respects. Perceived health risks (true or not) will stifle widespread takeup, as will the need for specialized glasses.

Despite impressive demonstrations of ?Auto-stereoscopic? 3DTVs by vendors at recent trade shows, we don?t expect to see a commercially viable ?glassless? solution any time soon.

During this week’s C-Scape analyst conference in London, Cisco’s Chairman and CEO, John Chambers, admitted that the company’s high end consumer telepresence initiative, Umi, is at least two years away from reaching significant volumes and “major acceptance”. He also indicated regret at the fact that the service had not been available before the 2010 selling season, and that it would be late 2011 before the company could be sure how well the business was performing.

As my colleague, Ben Piper, reported at the time of Umi’s launch, initial pricing levels were likely to be a major barrier to Umi’s adoption. 30% of people in our US survey of 2000 respondents indicated interest in the telepresence concept, but many of those same people are also keen not have any further monthly expenditures appearing on their bank statements. As much as the $599 initial purchase fee (or $1198 if you account for the need for a minimum of two systems for a conversation to take place), it is the $24.99 monthly fee which is likely to prove a strong deterrent to potential buyers.

Surprisingly, perhaps, John Chambers was prepared to accept that Umi is a longer, rather than near, term opportunity, however strategically important consumer telepresence remains to Cisco’s video network vision. This caution also explains to some degree why Cisco was prepared to take on the role of service provider in Umi’s early days, since it believes traditional service providers like telcos and cablecos need to be educated or persuaded on telepresence’s potential to drive ARPUs and help customer retention.

Cisco’s problem is that the window for Umi to capture a high end telepresence customer base may be fairly narrow. Connected TV-based solutions such as Skype are likely to increase their market penetration significantly over the next 24 months. Perhaps even more significant, we are likely to see growing home-based adoption of video conferencing on other non-PC platforms such as tablets and smartphones. These alternatives clearly will not offer the same big screen, high quality experience as Umi, but they could have both positive and negative impacts on Umi: on the one hand it will be argued that they “prove the concept” of mass market videoconferencing; on the other, they may eat into the early adopter market Umi is targeting, and, moreover, set the market price at much lower price points.

Service providers, in spite of early Umi partnerships such as Cisco/Verizon, will be watching closely for signs that alternative solutions are genuine competitors as this market emerges. They are unlikely to be blinded into making significant upfront investments by the temptation of additional ARPUs until further substantial evidence of Umi’s potential is demonstrated.

David Mercer