The Dark Side of 3D Printing

The upsides to 3D printing in the medical and business communities are tremendous, but at what price?

Feb 5, 2014 at 1:02PM

The potential that 3D printing offers manufacturers, the medical and research communities, and ultimately investors in search of growth, seems limitless. That's the good news. But as with any new product or service on the cusp of changing the way business is conducted, there are also risks. And in the case of 3D printing, the data suggests those risks could end up costing several industries billions of dollars.

According to new research from Gartner, the negative ramifications of 3D printing to businesses, particularly those that rely on licensing deals and intellectual property (IP) to generate revenue, are going to become a seriously expensive problem in the next few years.

Case in point
When 3D Systems (NYSE:DDD) announced it had entered into an agreement to acquire 3D modeling provider Gentle Giant Studios in early January, it gave the 3D printing giant instant access to Gentle Giant's cutting-edge technology. But just as valuable as its software to 3D Systems was Gentle Giant's licensing deals with some of the biggest names in the toy and entertainment industries.

Overnight, 3D Systems became the proud owner of franchise rights to megabrands including Harry Potter, The Walking Dead, and Star Wars. As 3D Systems said at the time of the acquisition, the deal will "immediately leverage Gentle Giant Studios' technology and vast library of digital content into its consumer platform and extend its existing brand relationships." Sounds good, but what if the licenses 3D Systems gained by acquiring Gentle Giant became worthless?

The problem
According to Gartner, 3D printing will be used by as many as seven of the top 10 global retailers by 2018 to "generate custom stock orders, at the same time as entirely new business models are built on the technology." If it turns out Gartner's research is even close, 3D printing is going to become a significant part of the manufacturing process for some of the biggest companies on the planet.

For 3D Systems and other license holders, the growth of 3D printing is a double-edged sword. On the one hand, if you bought a Star Wars action figure for your son or daughter over the holiday season, part of the cost likely went to Gentle Giant, now 3D Systems, in the form of a licensing fee. The same concept applies when you purchase most apparel with a professional sports team affiliation, and any number of other licensed items.

The downside to companies like 3D Systems will come as 3D printers, which are already being sold to consumers, become widespread and their capabilities continue to expand. The potential for consumers -- or worse, unscrupulous companies around the world -- to manufacture their own custom products, bypassing licensing deals and intellectual property holders, will be tremendous.

Gartner believes that as the ability to circumvent licensing and IP fees expands along with the 3D printing market, the cost to companies will reach a staggering $100 billion or more in just four years. Can you imagine the impact on a licensing behemoth like Disney (NYSE:DIS) which generates about 80% of the entire retail industry's licensing revenues?

Final Foolish thoughts
The negative impact of widespread 3D printing goes well beyond the street corner vendor hocking "Rolex" watches to tourists for $10: Rolex will muddle through. But $100 billion, or more, in losses to license and intellectual property owners, and the legitimate manufacturers that produce licensed items, is enough to put some companies out of business. 3D printing is poised to change the business community forever. Unfortunately, it's also going to change the black market for knock-offs and counterfeits, too, and not for the better.

The next step for you
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Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends 3D Systems, Gartner, and Walt Disney. The Motley Fool owns shares of 3D Systems and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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