Best Buy (BBY)
James Cameron’s epic thriller, Avatar took the country by storm last year. Many viewers and critics believe that Cameron changed movie making forever through extraordinary cinematography and special effects. The most significant development in the movie is that it was filmed and shown in three dimensions. Now movie fans and producers are asking if 3D is the wave of the future or a temporary luxury? Best Buy (BBY: Charts, News, Offers) is betting big on the former. Yesterday, retailer Best Buy and electronics manufacturer, Panasonic announced plans to carry the first line of 3D televisions marketed to home consumers.
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It is difficult to determine whether or not the demand for 3D in the public movie theater will translate to the home theater. Another 3D movie, Alice in Wonderland, came out directly on the heels of Avatar and set box office records in the first weekend. The movie-going public seems to be welcoming 3D with open arms in the theater. But will they welcome the new technology into their homes in the same way? At least a few analysts are unconvinced: BB&T Capital Markets Anthony Chukumba said, “I don’t necessarily think that 3D TV is going to move the needle a ton for Best Buy in 2010.” Barclays analyst Michael Lasser thinks demand for 3D home television is “uncertain” right now and Goldman Sach’s Matthew Fassler does not expect “consumers to pay a premium for technology without sufficient associated content.”
So-called “associated content” is the emphasis for Best Buy in the coming months. Panasonic is coordinating with national television provider DirectTV to bring 3D into homes via a 24/7 3D DirectTV cinema channel, a pay-per-view event channel, an “on Demand” channel and a free 3D entertainment channel. Furthermore, Blue-ray Disc, the cutting edge, high definition home entertainment platform is producing 3D content that will be sold exclusively at Best Buy stores. Broadcast sports are also making a foray into 3D. CBS plans to show the NCAA men’s basketball Final Four in as many as 100 theaters in 3D. ESPN is planning to launch an entire 3D channel and broadcast at least twenty-five World Cup soccer matches in three dimensions this summer.
Is there incentive enough for television fans to purchase a 3D television? That might depend on the price. Panasonic’s Full HD 3D Plasma Home Theater System includes a 50 inch Viera VT20 television, one pair of 3D glasses, Blue-ray Disc player and comes with a suggested retail price of $2,899.99 – that’s right – an almost $3,000 price tag and only one person at a time can enjoy full 3D television. Additional 3D glasses will cost around $150. Best Buy might be on the cutting edge of television technology and be positioned well for the long term, but profit over the next year to three years could be difficult to find. It is also important to note that Sony (SNE: Charts, News, Offers) and Samsung also announced competing 3D home theater systems. Best Buy is not the only player in this market. On the plus side, 3D is a novelty that might bring curious shoppers into Best Buy stores. Foot traffic is almost always good for electronics retailers.
Over the past few years, consumers have been gobbling up flat screen and high definition sets at a huge volume. Flat-panel televisions compose about 20 percent of Best Buy’s annual sales. Those home entertainment technologies still seem cutting edge. Are consumers ready to embrace 3D and render their recently purchased high definition televisions obsolete?
Other Stories on Best Buy
- Best Buy sells first 3D system in New York – DirectTV (DTV: Charts, News, Offers) gives first Panasonic Full HD 3D customer one year of free service.
- World Cup in 3D – ESPN plans to show up to 25 matches in 3D from South Africa
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Joshua Caucutt is long-time market follower and finance writer. Debt management, entrepreneurship and government economic policy are areas of emphasis. He regularly contributes to the Stock of the Day analysis.
