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BusinessJournal

September 19
TECHKNOWLEDGE
By Ivan Morantsky
Three-Dimensional Trouble for 3D-TV
World Cup disappointment, could end competitive advantage
3D-TV HISTORY
1995 Founded in Austin,
Texas by Henry
Hagland, a retired
multimillionaire, with
an entrepreneurial
f l a ir for
l ea di ng- edge
technology
2005 Demonstrated two
3-D h ol ogra ph ic
television prototypes
at the consumer
electronics expo in
Las Vegas, Nevada
Went public with a
successful IPO
E n te r ed t he
commercial
holographic
br oadc as tin g
business with the
broadcast of the
Tour de France
2006 Expanded to
establish
br oadc as tin g
operations groups in
Los Angeles, New
York, London, and
Paris.
Recruited Gary Oaks
as CEO, Hagland
assumed role of
Chairman
Televised holographic
broadcasts of World
Cup Soccer matches

Analysts report that 3D-TV, the pioneer of three-dimensional


television, stands to lose its competitive advantage and be overtaken
by industry rivals.
The combined effects of a shift in research and development (R&D)
focus from breakthroughs to incremental improvements, a flawed service
model, a limited subscription infrastructure, and tension within the
leadership threaten 3D-TVs ability to sustain its competitive
advantage.
SHIFT IN R&D FOCUS. 3D-TV was a pioneer in 21st century
television technology. While competitors were perfecting flat-screen
and plasma-screen televisions, the talented and ambitious 3D-TV
R&D team was creating an entirely new television product based on
holographic transmission of live action.
Following the success in 2005 of broadcasting the Tour de France
pilot and the subsequent 3D-TV initial public offering (IPO), R&D
became more focused on incremental improvements to the technology
rather than on making new breakthroughs.
Pressure to control costs forced focus on smaller, cheaper, less
research-intensive projects, such as refining imagery resolution, adding
zoom-in functionality, and making remote control units easier to use.
De-emphasizing technology innovation has led to predictions that
3D-TVs competitive edge will soon be lost to more aggressive players
in the market.
FLAWED SERVICE MODEL AND LIMITED SUBSCRIPTION
INFRASTRUCTURE. 3D-TV has adopted a live theater reservation
model. Reservations are required at least 24 hours in advance, and they
can be made via telephone, a Web site, or mail. Subscribers are
required to pay for reservations at the time they are made. This old-style
service model does not match the level of innovation of the new
technology.

According to analysts, had 3D-TV commissioned market research to determine customers


expectations of a reservation system, it would have discovered that just-in-time subscription
immediately before 3D broadcast was the way forward. 3D-TV could also have determined how
to cope with the volume of subscribers for the World Cup broadcast.
However, the untested legacy reservation system was
overwhelmed and could not process all the potential subscribers.
Following the event, 3D-TV estimated that one-third more
subscriptions and associated revenue could have been generated
if the just-in-time structure had been in place. The missed
opportunity was estimated at 500,000 viewers and $5 million in
revenue.
Analysts suggest that 3D-TV might have focused on the rollout of
the 3D-TV holographic technology and minimized the importance
of the supporting infrastructure.
Edward Bizet, the companys VP for Sales & Marketing, when
asked for comment, confirmed, 3D-TV is committed to
developing a significantly improved service model for subscribers to
use prior to a major-event broadcast. Bizet also confirmed that
the company is considering leasing holographic television
equipment for home viewing of all future special events and
super-scaling the technology to allow arenas to broadcast
holographic images of sporting events held in other parts of the
world.
Research conducted by 3D-TV supports the concept of a digital
content engine to implement a pay-per-use sales system. With such
a system, fans could purchase highlights from their favorite events.
This represents an untapped revenue source for 3D-TV.
The digital content engine would store historical sports moments,
statistics, and other archival information and then repackage the
material for various audiences. Users could then view
prepackaged holographic broadcast recordings instantly.
Sources are not sure whether 3D-TV plans to do this, but the
concept represents a much-needed revenue stream for the
company. And this concept depends on developing the supporting
infrastructure.

ABOUT HENRY
HAGLAND
Henry Hagland made his
fortune in the home and
auto security business.
He developed a security
system that contacted
res id en ts di rec tl y on
break-in and that
provided a real-time view
of the robbery. The result
was an integrated alarm
a nd d ig i ta l c a mer a
system.
An intensely private man,
Hagland retired to private
life after building and
s e l li n g h is s e c u r i t y
b usiness . He then
pursued his lifelong
hobby of optics, which led
him to holographic
p ho to gr ap hy a nd
ultimately to the quest for
h ol ogra ph ic m o vi ng
pictures.
Between 1992 and 1995,
he sponsored a series of
generously funded
research projects a t th e
Un i vers i ty o f Southfork
to solve the most difficult
technical problems of
three-dimensional
holographic television.
The result was tw o
pr o to t yp es f or
commercial use of
three-dimensional
holographic television,
3D-TV.

LEADERSHIP TENSION. Henry Hagland, the founder of 3D-TV, had been its manager and
leader until the IPO. His passion for the business and uncompromising commitment to
developing new holographic technology resulted in a closely managed business that
required his input for every decision.
The IPO included a new organizational structure that formalized the various business
support functions, and new executives were appointed. Hagland assumed the role of
chairman and Gary Oaks, highly respected on Wall Street, was named CEO. Tension
between Hagland and Oaks developed because Hagland could not stop day-to-day
management. Although the two have reportedly overcome their differences, some tension still
exists. According to staff, Oaks is popular with his employees and is strongly committed to the
future success of 3D-TV.
The opening of new offices in Los Angeles, New York, London, and Paris to launch the
broadcasting operations has compounded tensions. The staffs in local offices have
struggled to maintain a strong link with company headquarters in Austin, Texas and to
determine leadership direction. Oaks has worked hard to maintain staff morale and a
consistent strategic focus across all offices. However, Haglands reluctance to acknowledge the
global nature of the 3D-TV business has meant an on-going struggle for Oaks to share resources
globally.
MARKET TRENDS. In launching its broadcast business, 3D-TV joined one of the
fastest-growing global industries, Media and Entertainment (M&E). Based on current
projections, the M&E industry is worth over $740 billion. During the last two decades, the
M&E industry has undergone tremendous change, and the pace of that change does not appear
to be lessening. The M&E industry is shaped by these major trends:

CONSUMER
ELECTRONICS MARKET
LEADERS
North America
Whirlpool
General Electric
Kodak
Europe
Thomson Philips
Asia Pacific
Sony
Sharp
Toshiba
Matsushita
Canon
Samsung

integrated media
mergers and acquisitions
deregulation
new technology
convergence
digital revolution
globalization

The industry is in a state of unprecedented transition. Rapid


growth and change has increased consolidation as companies
acquire other companies to enlarge their customer base, move
into new markets, and acquire new technologies and services.
This merging of various businesses across traditional market
boundaries has resulted in fewer players that have a broader
scope of operation. With one focus on the design of holographic
television sets and another focus on the holographic
broadcasting business, 3D-TV typifies this convergence trend.

3D-TV also remains part of the highly competitive consumer electronics industry with its
wildly innovative television product based on holographic transmission of live action. 3D-TV
shares customers with companies that manufacture audiovisual equipment, home appliances, and
game and hobby equipment. Competitors in this market include such leading players as General Electric,
Thomson, and Sony. Some of the challenges facing this industry include managing complex supply
channels (including suppliers, manufacturers, distributors, and retailers), direct consumer channels,
distribution, transportation, and brand management.
Consumers are constantly seeking unlimited choice, instant gratification, and convenience, plus fast
delivery of high-quality, low-cost products. This results in high volumes, low profit margins, seasonal
demand, and changing buying patterns, which are all constant challenges for companies such as
3D-TV.
To add to this complexity, the consumer electronics industry is currently facing a dramatic evolution:
After several years of flat growth, the market is now moving again, largely because of digital
technologies. Further, the consumer electronics industry is gaining ground in emerging countries
like Vietnam, where labor costs are significantly lower. As a result, seasoned industry players
experience intense competition.
The consumer electronics segment includes these challenges and opportunities:

A shift in strategy from point solutions to life cycle management. For example, some manufacturers
are developing remote diagnostics capability to support products after they are installed.
A focus on continuous cost reductions. This industry is based on large volumes and low
margins, so significant business process reengineering efforts are engaged to improve the
fabrication and assembly processes, particularly to optimize the supply chain.
Growth in high added-value multimedia applications with Internet access and related services.
Examples include pay TV, program navigators, Internet applications, and satellite TV.
Significant investment in research and development and technological and industrial alliances.
One example is Thomson Multimedia, which is developing the next generation of interactive
Internet TV though alliances with Microsoft, NEC (ASIC and flat panels), Direct TV (satellites),
and Alcatel (TEM).

CONCLUSION. The potentially attractive entertainment applications of holographic live action TV


for consumers seem endlessvideo games, news reports, educational programming, reality shows,
dramas, comedies and sporting events to name a few.
3D-TV needs a solid recovery from the World Cup broadcast problems and needs to focus on
specific customer service requirements to restore customer satisfaction and to increase sales of 3D-TV
products and services. But, if 3D-TV cannot produce R&D breakthroughs, create a service model that
exceeds customer demands, increase its infrastructure capacity and flexibility, and unify its leadership,
it risks losing its market leadership position in the 3- D niche.

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