Industry Studies Indicate Sector in Good Health
The satellite industry is in strong health, with the industry showing strong increases in overall revenues and satellite players able to participate in new growth segments.
According to a State of the Satellite Industry report prepared by Futron for the Satellite Industry Association (SIA), worldwide satellite industry revenues in 2007 were $123 billion, an increase of $17 billion compared to 2006. In 2002, worldwide satellite industry revenues were just over $71 billion, so if the growth continues along this curve, it could mean industry revenues double between 2002 and 2008. Of the $123 billion in revenues in 2007, 60 percent came from the satellite services industry, the same as in 2005. In fact, the make up of the satellite industry revenues has remained the same between 2005 and 2007. Satellite manufacturing accounted for 9 percent of overall revenues in both 2005 and 2007. Ground equipment accounted for 28 percent industry revenues in 2007, the same as in 2005.
World Satellite Industry Revenues
"Booming interest in global positioning technology, and industry’s rapid expansion of the array of products and services using this technology, have delivered impressive market results," according to "The Space Report 2008: The Authoritative Guide to Global Space Activity," released in April by the Space Foundation. "Satellite radio and direct-to-home (DTH) television service are also contributing to substantial growth in the space industry. Private exploration of space by entrepreneurs and adventurers who invest significant personal funds represents an industry sector in its infancy, that could in the near future reach a turning point toward significant development."
The Space Foundation estimates that global space revenue from government and private sources reached $251 billion in 2007, a strong growth rate of 11 percent over 2006. More than three-quarters of global space economic activity stemmed from purchases of commercial satellite based products and services (55 percent) and U.S. government spending (25 percent). Activity in two commercial satellite services, DTH television and GPS equipment and chipsets, drove robust space industry growth, the report said.
The Space Foundation also indicates that satellite manufacturing revenues increased 14 percent to an estimated $13.6 billion in 2007. This growth was driven by a 26 percent increase in revenue for government payloads to $11.4 billion. Ground equipment was the largest growth sector of space infrastructure in 2007, increasing approximately 6.5 percent over 2006. Revenue from ground equipment related to space operations is estimated at $30.7 billion.
FSS Industry
The fixed satellite services (FSS) industry is a particularly strong sector that shows no sign of slowing down. "By all measures, the FSS industry of 2008 appears to be fairly strong and vibrant, fueled by the twin engines of Internet and HDTV-related services, augmented by new applications such as digital signage and communications on the move," says Maury Mechanick, counsel in the Washington, DC office of White & Case LLP. However, Mechanick believes there are potential obstacles ahead that could curtail this growth. "While business prospects continue to look favorable, there are two uncertainties that could affect near- or medium-term business growth," he says. "One is obviously the general global economic downturn driven by the mortgage and banking difficulties, coupled with the volatility in oil prices of the past several months. The question here is what ripple effect, if any, this may have on those business segments served by satellite operators. The second is the extent to which the expected roll-out of WiMax, still a few years in the offing, could diminish demand for certain types of satellite services. In the case of WiMax, it could either be a blessing or a curse for the satellite industry, and ultimately dependent on whether WiMax evolves into a network extension technology (blessing) or a network replacement technology (curse)."
World Revenues By Sector
| "If certain technologies/applications, like broadband, had demanded growth the way we had hoped, we may not have seen a down cycle. The projections for the demands of broadband satellite were probably over ambitious." — Caceres, Teal Group |
Andrea Maleter, technical director at Futron, also says the FSS industry was in good health. "The FSS industry has been very strong lately, and there is every reason to expect that the sector will continue to grow. From 2006 to 2007 global FSS operator revenues from transponder agreements (leases and sales) grew about 21 percent, reflecting both expanded levels of service (primarily from video and government customers) as well as strong pricing. While the major operators are adding new satellites to their fleets, they are also carefully realigning those fleets to maximize asset utilization," she says.
Though Patrick French of NSR says the credit crunch could have an impact in the FSS sector, "specifically clients who may slow or delay new capacity purchases, but this should not be a major negative. Overall the same basic trends continue as in year’s past with growth in video distribution, DTH, [high definition] and other related segments accounting for the majority of new capacity demand are the key trends for the coming year," he says.
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