Two-reader two-dimensional magnetic recording (TDMR) system is expected to improve areal density by about 10%, although practical considerations may limit the realization of all of the available gain. As a result, for further growth, hard-disk drive industry has started to develop the second-generation TDMR system, consisting of three readers. Although a natural evolution of the first-generation, it brings its own issues and challenges. In this paper, we study the behavior and optimization of the three-reader system with a particular focus on reader placement and cross-track error-correction coding gains. In addition, we consider a lower cost two-reader solution with streaming intertrack interference cancellation as an alternative to employing three readers.