In this fantastic guest article, 3D content expert Torsten Hoffmann warns producers against unrealistic expectations for the commercial value of 3D content and outlines the business models of making money with 3D content.
It continues to surprise me how many 3D producers have the wrong market expectations for their new 3D titles or upcoming projects. Many read about the demand for content but they fail to understand the market realities. At the end of the day it is not about how much demand there is for 3D content, but what prices the buyers are willing to pay. Most of my day is spent selling 3D content internationally and talking to producers, so I thought I would share some of my learnings in this nascent industry.
First, let’s be clear: The reality is that 3D content currently has LOWER commercial value than 2D content. “WTF?!” I hear you say. Well, let me explain.
On the one side, there are thousands of TV channels, VOD platforms, web video offerings, DVD companies catering for a global 2D audience of a few billion people. There are easily 100 times more potential buyers for 2D content than 3D. On the other side, there are relatively few 3D Channels or VOD offerings in operation, and they are serving a small (but growing) population of 3D-ready TVs. So far I think we all can agree: the 2D pie is much larger.
Now, let us look at the supply of content. It is true that there are millions of hours of 2D content available in the market including endless archive material, whereas 3D content is in limited supply. I believe that most people in our industry are solely relying on this supply metric. However, they are forgetting that price is where supply and demand meets. As I explained earlier in 3D, both supply and demand meet at a much lower level.
So, how are the buyers behaving? There are some major broadcasters who are investing heavily into 3D. Sky 3D in the UK and 3net in the U.S.A. are the most talked-about companies. These channels understand that they need to help kickstart the industry of 3D content producers and pay premiums. But there are relatively few of these top-tier buyers, which brings me back to the first point: Beyond this tier, we find a small number of buyers who can largely be categorised like this.
1) Smaller 3D channels, typically in the genres of music, documentary or sport. These channels are just starting, have very little distribution (read=cashflow) and are working on low budgets and/or are producing most of their content in-house.
2) 3D start-ups, typically Over-the-Top (OTT). By definition operating without acquisition budgets and following the infamous revenue-share strategies.
3) Cable or IPTV platforms that want to offer 3D as VOD or as a barker channel to their existing subscribers. From their point of view, 3D is a “PR” thing and they are not spending a disproportionate amount of content budgets on titles that only 1 or 2 percent of their customers can watch.
Admittedly, there are more types of tier-two buyers and I have grossly simplified the buying behaviour above. The situation, however, is without ambiguity. Yes, these buyers have a strong demand for 3D content. But clearly, the first two categories are very difficult places to be in to make money. The type 3 will spend, but has to keep check and balances with the 2D business which generates all of the revenues.
Having said all this, there are, of course many exceptions and ways how to make the economics work.
- Obviously most 3D productions are being monetized as 2D titles as well (cannibalisation effects aside).
- There are a few high-end productions that are being grabbed by all the major tier-one buyers.
- There are new and rapidly growing alternative ways to distribute 3D content.
- We have 3D titles that have returned their production costs within 6months. There are clever strategies to reduce production costs or to get 3D projects off the ground.
- Many players in this industry are focussing their efforts on the core territories. I continue to be surprised how much interest there is from emerging markets.
I will talk about these points more in part 2 of this article out soon!
Torsten Hoffmann, 35, is a recognized leader in 3D content as the distributor of one of the largest stereoscopic 3D portfolios in the world. He tweets @3DContentBlog, blogs at 3DContentBlog.com, speaks at many conferences and is currently Managing Partner at Global Media Consult (GMC) where he also represents 40 international pay TV or Free-to-Air channels. He coordinates GMC’s worldwide network of independent experts, consultants and agents with more than twenty international offices in Europe, Middle East, Africa, America and Asia. Additionally Torsten is a Director at WildEarth.TV, a 3D wildlife channel from South Africa featured a few months ago on 3D Focus.
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