3ality Digital CEO Sandy Climan: 3D CEO

Three-D imagery has been around in one form or another since your great grandmother experienced early 3D efforts, but the imagery was crude and the experience created too much eyestrain, even with stereoscopic photographs at the turn of the 20th century. In 1952, the movie industry experimented with 3D glasses but the imagery was costly to produce, the results were crude, even with 3D glasses, and the industry lacked the standardization necessary for widespread use. But the advance of digital technology, including the falling unit price of information storage, now allows for the creation of 3D in ways that were simply not possible before. 3ality Digital, a Burbank, CA based start-up, is in the vanguard of making 3D generally commercially available, both in theaters and for home TV viewing. The company markets a proprietary software that allows production companies to shoot 3D images at costs that are close to 2D by virtue of a software algorithm that adjusts and aligns the movement to conform to 3D as twin cameras move and pan images.

The process of a single camera capturing what the eye sees is complicated enough. Two cameras working together, simulating the way your brain sees images, is a quantum leap, far more difficult than 2D. The human brain processes the different images seen by the left eye versus those seen by the right into what the mind generates as a 3D image. In making Avatar, filmmaker James Cameron spent a great deal of time and money – reportedly around $250 million – in post-production work to get the effect he sought.

Although Avatar did not use 3ality’s technology, the film’s box office popularity is expected to greatly advance public demand for 3Din all media, including existing HDTV, Internet viewing and, ultimately, hand-held devices.

3ality (www.3alitydigital.com) was formed in 2007 from the rollup of several companies, including Burbank, Calif.-based Cobalt Entertainment, which was founded by Steve Schklair, and Munich-based 3D-IP GmbH. It is backed by Modell Ventures, a broadcast venture firm and NFL team owner. The company’s management team is headed by Sanford “Sandy” Climan, a Bronx-born, Harvard- MBA educated former Creative Artists Agency executive, who produced the Howard Hughes biographical film The Aviator, directed by Martin Scorsese and starring Leonardo DiCaprio. Climan also serves as president of Entertainment Media Ventures, a Los Angeles-based media investment company active in film and television. 

Climan and his partners are betting that 3D will become the next “big thing” in consumer technology. To date, the company’s technology has no rival, just as Apple’s Pixar proved be a unique play when it came to computer-generated graphics production. Its current customers include Sony, Disney, Fox Sports, Imagica (Japan), BSkyB (U.K.) and Peter Jackson, the New Zealander who directed the Lord of the Rings film trilogy. In one demonstration of the technology, viewers of an NFL football game filmed in 3D reported feeling as if they were actually standing in the huddle with players. The NFL is interested in going 3Das soon as use of the technology is practical because the fan experience goes up exponentially – suggesting advertisers can be charged accordingly. One sports executive said the difference is palpable: “I’ve watched football my entire career. When they’re running down the field, I feel that I can intuit what the runner is thinking because you can see the look in his eyes. I’m with him.” He said the players look entirely different in 3D than in 2D because they’re volumetric – you can see exactly how big they are.

In another demonstration four years ago, 3ality filmed the rock band U2’s Vertigo tour in South America, creating the first live-action 3Dexperience. But the impact of 3D is not confined to sports and entertainment. Imagine the transformative impact on sales when Procter & Gamble, the auto industry and McDonald’s start marketing their products in 3D. It doesn’t end with consumer products. When complex systems or prosaic parts can be brought to life via 3D, B to-B marketing will never be the same. CE’s J.P. Donlon caught up with Climan before he headed to Davos to speak at the World Economic Forum.

What’s the business model for 3ality Digital?

Our systems have all of the enablers for metadata capture. We intend to extend these technologies into the home in terms of set-top boxes and consumer electronics applications that take all of the software that we’ve developed so that they become as simple as tuners. Remember the old TV show, The Outer Limits, and [its tag line] “Don’t touch that dial”? It’s no longer just a vertical control and a horizontal control; there’s now a depth control that’s necessary.

We have three different lines of product. The two that we’re focusing on right now are 3flex, which include 3D camera systems and processors, and 3Play, which is the extension of our technologies into the home. We don’t make cameras, we make the systems that allow two cameras to work together. The 3flex systems include the controls that allow for dynamic depth balancing and change while you’re shooting.

What we’re really selling is licensable software. As best as we can, we encourage others making mechanical camera rigs, robotic camera rigs, to bring their rigs up to the specifications of what the software demands, which is what is necessary for quality image capture in general. Those other camera rig manufacturers will, we hope, be our clients. At this point, we are the only ones who have developed the controls and the software that work with those mechanical rigs to bring the accuracy you need.

Tell us more about the commercialization and distribution of the technology – and whether viewers will still need glasses to see 3D.

You will need 3D glasses well out into the future. The U2 3D experience showed you can have 2D camera movements and yet create a concert film unlike any experience anyone has ever had. This year, of course, Avatar takes everything to another level. What Cameron was able to do was to take all of the technologies – 3D, performance capture, computer-generated images and a brilliant story – and use the technologies intimately in the experience of the story he told. And it works on every level.

It is incontrovertible that a certain percentage of every studio’s films in the future will be shot in 3D.

It is incontrovertible that a certain percentage of every studio’s films in the future will be shot in 3D.No one would have thought this feasible at the beginning of 2009 in the midst of the economic meltdown. Sony, Panasonic and others have decided that 2010 is the year that the technologies have lined up to launch an assault on the home with 3D. Similarly, BskyB in the U.K., which has been a leader in the transition to high-definition TV, has decided that they will launch the first European full 3D channel before the end of this year.

Even though everyone believes that 3D is unlike HD, the transition from standard def to high def in the home, is a nonlinear transition. The experience is not only creatively different; its impact is so radically different on the audience that there will be the ability to launch channels that are separate and distinct even if they’re carrying the same entertainment product. 

Historically these transitions have taken longer than their proponents have expected.

The NFL is an interesting case study. It looked at two things. The first was our 3D film of U2, where they were impressed with the quality of the output. But even more impressive was the first live 3Dbroadcast from our studio in Burbank to the floor of the National Association of Broadcasters convention. We had a theatrical screen set up inside the 400-seat tent with two early prototype 3D televisions.

It dawned on us about a week before that since we were showing this to a bunch of entertainers and broadcasters, maybe we should exhibit something entertaining for them to watch. We asked Howie Mandel to present his new game show. Howie charmed the pants off of everyone in the tent by demonstrating not only the power of 3D technically, but the entertainment power of 3D. Anyone who asks whether comedy can work in 3D can reference that experience. It was phenomenal to witness the immersiveness of audience impact.

In December 2008, we broadcast live in 3D the first NFL game with the NFL Network. It was the Chargers versus the Raiders, and while it was not the most interesting game you’ll ever see, the NFL executives huddled around the TV came away with exactly the same conclusion that everyone else did, which was watching it on television was mesmerizing. You just couldn’t take your eyes off of it. David Modell [of Modell Ventures] tells a story of Ozzie Newsom, the general manager of the Ravens, who spent his life catching footballs, saying that when he saw the football come off the screen, he instinctively reached for it. It was a reflex action. I saw people crouch down to try to catch the football when they saw it coming at them, because you feel an entirely different emotion when you’re in a 3D space.

How expensive was the technology to develop? Is it generating revenue for the company and if not, when do you expect revenues to come in?

As a private company, we’re not at liberty to say what our revenues are, but suffice it to say that our model fits the profile of a traditional venture-backed company. In terms of our progress, we’re well advanced since the starting pistol went off late in 2008. Prior to Sony’s announcement at the end of August, when Sir Howard Stringer gave an interview to the Financial Times saying all product will be enabled for 3D, we were moving full steam ahead, full bore, by creating a clear path for the broadcasters and production companies that serve broadcasters.

The NFL shoot sets out exactly what you need in terms of equipment and software. We have tested our pricing and found receptivity to it. We’ve actually been generating revenue for many years. Our original 2010 revenue projections were met in December 2009. And we almost doubled our projection for 2010.We are on the path to be profitable no later than the fourth quarter of 2010. So our business model is being validated by the market.

What do you reckon is the overall potential size of the 3D industry?

Putting aside our business, Sony projected for itself about $11 billion by 2013. That’s just the home consumer market. For those that serve that market, of which we are one, you’re either in the hundreds of millions or billions of dollars. Again, the time frame in which this takes place depends on many variables.

Keep in mind that the transition involves software, not hardware. When plasma TVs were first introduced, initial prices of $18,000 or $20,000 were not uncommon before volumes brought the price down. 3D involves software upgrades to the set top box. However, you do need a TV that’s either going to be rated 120 hertz, or offer a refresh rate that sends you a shuttered, alternating 3D signal, or have a polarized filter on it. But these will be offered at consumer prices. So, when you walk into Best Buy in 2010, it’s your replacement TV. You won’t have to go to a 3Dsection of the store.

How big a company can 3ality become?

We are working through those issues of our business model. As with any venture-backed company, we’re sort of the tip of the spear. Large companies didn’t even identify the problems that we’ve solved. The value of 3ality and our current pathway forward will be driven by the dynamics of the marketplace. It’s a moving target. So, do we become a company like Dolby? The industry is moving so quickly that our most effective option may be to partner with global companies that will accelerate our sales. Because what we’ve developed is uniquely needed, it allows us to run the race with people who have resources that we as a venture-backed company at this point don’t have.

Is there anyone out there with competing software comparable to what you have?

We have not identified anyone that competes with us. And more importantly, the global companies we’re dealing with haven’t identified anyone who competes with us.

Am I sitting opposite the next Steve Jobs?

That is certainly not the case. I am no Steve Jobs. Trust me, I’m just a guy from the Bronx who managed to get out of Bronx [High School of] Science and amble through the entertainment industry.