By Jason Bates
When the first commercial imagery satellites were proposed, owners and investors had visions of billions of commercial dollars dancing through their heads. But the commercial market forecasts for the industry were proven to be wildly exaggerated, and the satellite operators struggled for years.
Today, the industry has righted itself, thanks to help from the U.S. government. New satellites scheduled for launch throughout the next few years promise to increase the choices available to users, and the interest of Internet search engines in commercial satellite imagery promises to introduce the technology to an even wider array of potential customers.
The Commercial Market Today
The U.S.-based imagery satellite operators struggled early in their existence, as neither the commercial market or the expected support from the U.S. government materialized. "The commercial market has existed," says Bill Wilt, senior vice president of domestic sales and mission support for Geoeye Inc. "There has been aerial imagery, and in a lot of places, space imagery could do the job; sometimes better depending on the application. That said, when Lockheed Martin, Raytheon and Mitsubishi formed Space Imaging in the vanguard of the industry, to some degree, even though we were armed with the Frost & Sullivan reports, they were depending on a build-it-and-they-will-come kind of thing. It was a brand new service in the market, but now the industry is gathering legitimacy in the marketplace and notoriety."
The U.S. government finally signed on as a major supporter of the industry in 2003 withe the Clearview program. Under the effort, the U.S. National Geospatial-Intelligence Agency (NGA) awarded contracts to the three existing U.S. imagery satellite operators to provide raw data and products. The NGA then pledged to support the future of the industry, awarding Nextview contracts to Digitalglobe and Orbimage that would support the development of their next-generation imaging satellites. Space Imaging, the first U.S. company to actually orbit a commercial imagery satellite, Ikonos, was the loser in the government's contest to determine which operators would survive, and the company was acquired by Orbimage in January, creating Geoeye.
Now with the near-term future of the commercial operators secured thanks to government help, the companies are placing some more emphasis on developing the long-sought commercial market. At one point, the U.S. government accounted for 80 percent to 90 percent of some satellite operators revenues, officials say. Today, that number has dropped closer to 60 percent, and an increase in the profile of commercial satellite imagery could help shift the ratio of revenues from mainly government to mostly commercial. "Some of the growth has been through industry efforts, some through technology, and there has been a lot of work the companies have done with the media," says Chuck Herring, spokesman for Digitalglobe, which operates the Quickbird satellite.
Other industry officials doubt that the satellite operators will ever see commercial operators reduce their dependence on government customers too much. "There is more flux and change now in the industry than ever before, and that makes it interesting," says Clark Nelson, a spokesman for Spot Image, the U.S. marketing arm of French imagery satellite operator Spot Image. "But the reality of it is that sales are now and will continue to be 80 percent government. The equilibrium that has been achieved throughout the year hasn't wavered much, and you don't see it wavering much in the future.
The companies will continue to make sure that the NGA, the satellite operators primary source of revenue, remains well served, says Ed Jurkevics, an analyst with Chesapeake Analytics. Other sources of revenue, such as licensing fees from foreign ground stations and from commercial customers and international governments, will contribute, but "the overestimation of commercial markets led to unrealistic expectations," he says. "The industry should have first been called 'privatized remote sensing' not 'commercial remote sensing.' Originally the NGA sat back, thinking that the commercial players would get on their feet with commercial markets, and the U.S. government would be able to come on board when and as they pleased. But this was a miscalculation all around. The late adoption by the NGA practically killed the industry, as Ikonos was past the half-way point in its design life before Space Imaging got their first order from the NGA. The commercial markets had a significant latency, and could not make up the difference."
But that does not mean that imagery satellite operators and government customers around the world would not like to see the companies grow the size of the commercial market, providing another source of money and stability for the industry that governments are becoming more dependent on. "The U.S. government, particularly, is keen to know that we are a diversified industry, and we are keen to be as well," Wilt says. "We don't want to be dependent on any single provider. We are looking to do a spread of revenue. I believe that today, we are fairly diversified in the marketplace."
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