Reshaping the Value Chain for an Expanding Earth Observation Industry
With over $1 billion in Earth observation data sales in 2009, and nearly $4 billion forecast in the next ten years, all levels of the value chain will scramble to secure their share. To compete against free and low-cost government data solutions, commercial operators must develop and expand their service offerings by providing complete geo-information solutions, a move which will lead to increased pressure on the already-fragmented value-added services industry. Manufacture and launch industry will look to capitalize on the wealth of new business as the sector expands.
Reshaping the Value Chain for an Expanding Earth Observation Industry
By Adam Keith, Euroconsult
Government space programs lead the way in satellite launches
206 EO and 54 meteorology satellites are scheduled for launch in the next ten years, generating $27.4 billion in manufacturing revenues compared to a total of 128 satellites and $20.4 billion in revenues the previous decade. 93 out of the 206 EO satellites will be launched by established government space programs. While leading space agencies such as NASA, ESA and JAXA have a clear environment focus with future missions designed to collect critical information on the Earth’s climate, much of the industry growth in the next ten years will come from emerging government EO programs and commercial actors.
New government EO programs are expected to launch 65 satellites by 2018, compared to only 15 the previous decade, generating $3.7 billion in manufacturing revenues. By 2018 34 countries are expected to launch satellite capacity for EO compared to only eight in 1997. New entrants from countries such as Vietnam, Malaysia, Chile, etc., view EO as a stepping stone. With the experience gained from building an EO satellite – often through technology transfer programs from leading satellite manufacturers – some work towards building a larger, more comprehensive space program. Data from the satellites is then used to serve local requirements in resources management, cartography and disaster management.
More sources of EO data: commercial EO satellites in expansion phase, governments look to commercialization
In 2008 commercial data sales reached $916 million with 23% annual growth over the last three years with defense markets primarily driving growth. DigitalGlobe, GeoEye and SPOT Image lead the way for commercial data sales and distribution capturing a combined 63% of the total market in 2008. Commercial satellite operation is also going through significant expansion as operators seek to tap into growing demand for highly accurate, high-resolution data. Starting with Ikonos in 1999, a total of 16 commercial satellites were successfully launched through 2008; this figure is anticipated to grow to 38 by 2018. Along with market growth, competition is on the rise with the emergence of new enterprises – including commercial operators and government programs – commercializing both optical and radar data. Over the last two years, TerraSAR-X, RapidEye, COSMO-Skymed satellite systems have come online, and new entrants are expected over the coming decade.
Government remains major data customer, but increasing demand from the private sector
Following a sharp increase in security needs in the last few years, government defense customers represent 62% of data revenues for commercial operators. Other government usage represents 18% of commercial data revenues. While the private sector has slowly adopted EO solutions, the conditions are now right for considerable growth, with total data market revenues anticipated to grow by 16% CAGR in the next ten years to reach nearly $4 billion in 2018.
Private sector users have in the past been reluctant to adopt EO products and services, with the exception of the oil and gas industry. Educating end-users and providing a compelling cost-benefit analysis to enterprises has also been challenging. But the industry has received a considerable boost from the mass market appeal of “virtual-globes” such as Google Earth. The emerging “consumer” service market is already seeing fast development with leading operators and service providers partnering with mobile-device and GIS companies to supply consumer-driven location-based-services utilizing EO data.
Demand for EO data will grow for resource management, agriculture, maritime applications, and disaster relief uses. But existing and emerging operators, service providers, and distributors now need to translate that growing demand into sustainable sales of data and services, with a business model enabling them to respond to the unique requirements of each application area.
Growth in demand and competition will encourage operators and service providers (including government entities commercializing data) to diversify their services offering as they look to develop business opportunities and grow market share. To expand globally and develop their distribution networks in order to better serve local customers, commercial operators are establishing regional offices and subsidiaries or partnering with local companies for data resale and/or exclusive regional distribution. Such actions are creating a convergence in the service-chain with companies increasingly capable of providing end-to-end solutions from raw data to increased value-added services. With operators having links upstream through parent companies or shareholders, fully integrated companies are emerging.
More data and figures from Satellite-Based Earth Observation, Prospects to 2018, a comprehensive market survey providing forecasts, exhaustive analysis of commercial & government data supply, assessment of business opportunities and analysis of the value chain. For more information: www.euroconsult-ec.com
Disclaimer: The opinions expressed herein are the personal opinions of the author
About the Author
Adam Keith, Senior Analyst at Euroconsult, is the principal author for the Satellite-Based Earth Observation report and is a specialist in remote sensing. He contributes to several other Euroconsult reports and consulting projects, particularly related to the institutional market.
Prior to joining Euroconsult Adam worked at the European Space Agency, within the Directorate of Earth Observation primarily analyzing market and value chain development. Adam spent the early part of his career working within the oil and gas remote sensing exploration services group at Infoterra Ltd., EADS Astrium.
Adam holds a Masters in GIS and Remote Sensing, from Cambridge University, and a degree in Geology from the University of London. Adam spent two years in the Euroconsult Paris headquarters before moving to our Montreal office in 2008.
Monday November 9, 2009
Adam Keith
