Will WorldView-3 help DigitalGlobe to capture the global imagery market?

Will WorldView-3 help DigitalGlobe to capture the global imagery market?

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Together with WorldView-3 and the rest of DigitalGlobe’s constellation, DigitalGlobe earns a near monopoly in the higher resolution commercial imagery market in US. But is that enough?

A week before the launch of WorldView-3, DigitalGlobe expedited the launch of WorldView-4, the erstwhile GeoEye-2, to mid-2016. Together with WorldView-3 and the rest of DigitalGlobe’s constellation, WorldView-4 will provide DigitalGlobe a near monopoly in the higher resolution commercial imagery market in US.

Surely it a great start, however, there are a number of challenges that the imagery giant would have to counter in order to derive the expected benefits from the heavy-duty investment in the WorldView constellation.

Revenue model

DigitalGlobe, which has a market capitalisation of $2.3 billion, gets about 85% of its revenue from government contracts around the world. US government contracts alone account for 58%. Yancey L. Spruill – Chief Financial Officer, Executive Vice President and Treasurer, DigitalGlobe confirms that in terms of split of revenue, about 60% of DG’s revenue comes from the US Government; 20% DAP; 8% civil government; about 6% LBS; and about 6% from industry verticals. According to an estimate by SpaceNews.com, “the three-month delay in the launch of WorldView-3 has deprived the company of $25 million in U.S. National Geospatial-Intelligence Agency (NGA) revenue in 2014. These payments will not be lost, only deferred.”

The global market for commercial satellite imaging is forecasted to reach USD 5,018.6 million by 2019. The market growth is driven by increased demand for applications such as oil and gas (energy) sector management and natural resource management. Insurance, real estate and city planning and fleet management are emerging as other potential commercial applications for satellite imagery market.

It is imperative for DigitalGlobe to wriggle its way out of its revenue model that heavily depended on the government contracts; especially, when its global competitors too are catching up.

For this very reason, DigitalGlobe has been lobbying with the government for relaxing the regulation limits on commercial imagery to 25 cm for over a year. In fact, Spruill, during the conference call with the stakeholders on July 31 said, "There is a market opportunity with a roughly $400 million addressable market that we cannot participate in today because of the regulatory regime of our government," Spruill had then said. Later, he also added that the company had identified Europe, Japan and the United States, which already have well-developed aerial imagery industries, as key growth markets.

Battling the SMEs

The clarion call by the market for real-time imagery has pushed SMEs like Planet Labs and SkyBox Imaging (now poached by Google) to build up a constellation of small satellites which would work in tandem to give updated images at ‘internet’ speed.

Skybox has designed satellites to capture images and deliver them to customers with details down to less than a meter, and Google is working to bolster its mapping services and improve Internet access.

Planet Labs has already pushed around 28 CubeSats to the space and is planning to create a network with 100 such small-satellites. The agility in manufacturing and launching phase coupled with the low-cost has shown results for these start-ups.

Although, Jeffrey R. Tarr, Chief Executive Officer, President and Director, DigitalGlobe says ‘Skybox has a very different type of satellite and that it is more complementary, as opposed to one being an alternative for the other’, there are few market experts who see this as an attempt to fight fire with kerosene.

Fighting at several fronts

In addition to the aforementioned concerns, the imagery provider recently launched a scathing and direct attack on its competitors and even gave enough signs for the markets to believe that it is planning to compete with aerial imagery providers too.

A Reuters report states that the global market for high-resolution images is dominated by aerial surveyors such as Japan's Pasco Corp and Norway's Blom ASA, which use cameras mounted on aircraft to capture images with resolutions as sharp as 15 cm. Andrea James, analyst at Dougherty & Co, was quoted in the report stating that [after the launch of WorldView-3] DigitalGlobe can sell imagery at $27 per sq km or less, compared with the $200 sometimes charged by aerial surveyors.

In February 2014, Tarr said that the hiccups faced by DigitalGlobe in the last quarter of FY13-14 would be countered by fine-tuning the company’s approach towards relatively undemanding customers.

Another interesting aspect is that DigitalGlobe has concerted efforts to grow its roots in verticals. According to Tarr, the company’s investments in the oil and gas, and mining business have been fairing well. In the NGO business, the company claims to signed few contracts, and is also bolstering its geospatial solution offerings by building out its Big Data platforms.

These moves can also be inferred as DigitalGlobe’s way of saying that it is game for fighting the changing dynamics of the market. But it also falls suspect to the claims by some critics that maybe DigitalGlobe is trying to stretch itself too thin by focusing on different objectives at the same time.

The moot point is DigitalGlobe has the arsenal and the capabilities to win this battle and fuel its growth prospects in the global commercial imagery market. However, despite the US government relaxing the regulations on the commercial sale of 25cm resolution imagery, DigitalGlobe stands to gain in the long-run only if it succeeds in fighting this multi-front war ‘profitably’. As Winston Churchill once said, “Difficulties mastered are opportunities won”.