No. of Recommendations: 5
Further thoughts on Best Buy.

The company seems to be shifting its emphasis a bit. The mobile segment is growing well and is supposed to be a big revenue generator in the future. And 3D TVs seem to be a big deal for the company, as that is where the big margins are still. It's losing out on price on the older TVs to competitors, which is what hurt it so badly last quarter. The question is, how big a deal is 3D?

Personally, I think it's going to remain a niche, for several reasons. One, I wear glasses, as does a huge fraction of the population. I already have an object on my face and fitting 3D glasses on over it is not ideal in any way. Actually uncomfortable. I'm willing to do that for the occasional movie (because it's only for a couple of hours), but not every time I want to watch television.

Two, 3D is not really necessary to tell the story. It's still a gimmick. Went and saw Tron Legacy in 3D and there were only a few times where it seemed as if it was actually there. Most of the film was in (or appeared to be in) 2D and it would have been perfectly fine to have the whole thing in 2D. When I saw Toy Story 3, it was in 2D and I still enjoyed it immensely.

Three, 3D is expensive, both to film and to watch. That's going to hold back development, especially if content producers are going to be receiving less thanks to cord-cutters and streaming. Not to mention the bandwidth requirements of streaming 3D.

Blu-Ray was supposed to displace the DVD and it hasn't. Streaming probably will displace the DVD, but it will take a while. 3D is supposed to displace regular television. But with HD flat panels still new to many people (I just bought my first one ever a couple of months ago), I can't see people paying up for an experience that might not be that superior to enough people to justify the price and discomfort.

Yet Best Buy is dependent on high-margin items like 3D televisions, else its margins are going to get squeezed by the likes of Amazon and Target. Which is exactly what happened last quarter.

Cheers,
Jim
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