Market Overview

Why Apple Won't Release a 3D TV

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Apple's (NASDAQ: AAPL) first television set is expected to be groundbreaking, but don't count on using it to watch Avatar in 3D.

While 3D technology could be in the pipeline for future iterations of the Mac maker's hotly anticipated television, the launch model is very unlikely to feature a three-dimensional display.

Contrary to popular belief, this does not have anything to do with keeping the costs down. In fact, many analysts believe that Apple will sell the most expensive TV it can muster. (I personally disagree with this logic, but what do I know? I'm never right. Oh wait, yes I am.)

Another assumption is that Apple may skip out on 3D because of the clunky glasses that are required to view the eye-popping images. That is also false. For one thing, some companies are starting to release new TVs that work with the same lightweight glasses that are handed out at movie theaters. Second, Apple may not even need to use glasses to produce 3D images. Last fall, the company filed a patent for a new projector that could display 3D images to multiple viewers without the need for ugly headgear. While it is very possible that this patent will be put aside and saved for a lawsuit (to attack Samsung or HTC if/when they release a 3D projector, of course), the fact that Apple filed the patent at all shows that the company is thinking ahead.

Why, then, would Apple not bring 3D – the technology many people still believe will one day become the viewing standard – to its first TV?

In short, 3D TVs aren't popular enough.

DisplaySearch, one of the companies belonging to the market research conglomerate NPD Group, has released a report (via DigiTimes) regarding the growth of 3D televisions. It turns out that, in addition to sluggish sales in America, the 3D TV market might be shrinking.

“While the industry is truly global, regional differences are increasing. For 3D, the most enthusiastic regions are Western Europe and China, while the mix of 3D in North America actually declined in Q3'11,” DisplaySearch wrote in a company release, citing its own Q4'11 NPD DisplaySearch Quarterly TV Design and Features Report.

displaysearch_3d_tv_chart_inside.jpgChart Source: NPD DisplaySearch Quarterly TV Design and Features Report

“We were surprised to find that 3D appears to be a far more popular feature in China than North America, and the penetration rate was two times higher in the last quarter,” Paul Gray, Director of TV Electronics Research at NPD DisplaySearch, said in a company release. “Our report also indicates that North American and Japanese 3D penetration is lower than the Middle East.”

But is it really that surprising that 3D is more popular in China than in America? American consumers have already had their fair share of HD upgrades. Americans were some of the first to rush out and buy new plasmas and LCDs. They even bought those horrible projection screens that were released a decade ago and claimed to be “HD-ready.”

After years of upgrades, the American market is well past its peak. There is still room for growth, and I have no doubt that Apple could further expand that avenue. But while many corporations – most notably Sony (NYSE: SNE) and LG – expected 3D to be the feature that made consumers replace their old sets, it is now clear that people want something more.

In nations that have not gone through the HD transition, however, consumers are much more willing to go after the bells and whistles Americans are now willing to live without. For Chinese consumers, a new 3D TV may very well be their first high-def television, so it's a much more exciting investment. This is why Chinese consumers are more interested in acquiring sets with a large feature set. Americans, on the other hand, are less interested in features and care more about the size of the picture.

From my own personal experience, I can tell you that a lot of the extras are not worth the money. Right now, the TV's primary function is to display content. Whether it's a movie, a TV show, a movie, or basic cable, the function is the same. And as any sports fan or movie buff will tell you, there is no such thing as a screen that's too big. That's why Americans care so much about the size but not other features.

That won't change until the next TV revolution comes around. Could Apple be the company that brings that revolution? Perhaps. But if so, you can be sure that it will be with something other than 3D gimmicks.


ACTION ITEMS:

Bullish:

The rise of 3D televisions in emerging markets should be somewhat comforting to:

  • Sony, which has spent millions of dollars promoting its 3D options. The company even released a 22-inch 3D set target specifically at gamers. But at $500, most Americans don't care. China could prove to be Sony's saving grace in this regard.
  • Panasonic (NYSE: PC), a company that doesn't know how to make an inexpensive TV.
  • Philips (NYSE: PHG), should it ever decide to sell a 3D TV (the company had one in development but it does not appear to have been released).
Bearish:

If Apple forgoes 3D at launch (as I anticipate), the company could:

  • Radically transform the TV industry by sending the message that 3D is not the future of home entertainment.
  • Cause a few headaches for Comcast (NASDAQ: CMCSA), which has dabbled in 3D content delivery.
Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Follow me @LouisBedigian

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