Dave Davis, CEO of Global Eagle Entertainment. Photo: Row 44

[Via Satellite 01-09-2015] In-Flight entertainment and connectivity provider Global Eagle Entertainment (GEE) is not worried that burgeoning demand for In-Flight Connectivity (IFC) services will cannibalize the more established world of traditional content, Dave Davis, CEO of GEE said at the Citi Internet, Media & Telecommunications Conference in Las Vegas this week. IFC has become an ever-increasing focus for GEE, which in October 2014 signed a long-term agreement with  SES to provide worldwide Ku-band connectivity for aircraft. The company also made a number of content-based acquisitions in recent years; notably Travel Entertainment Group Equity Limited in 2013 and Advanced Inflight Alliance (AIA) in April 2014. Davis said that, rather than IFC and traditional content chipping away at each other, he sees the two side by side as a boon.

“We think it’s almost more complementary and just helps the market grow faster than just [to] replace or displace the traditional content world,” he said.

GEE sees having content services as a competitive advantage against other IFC providers. According to Davis, the company controls more than half of the content delivery market, as its IFC business has been growing at a rapid clip. GEE anticipates a growth rate of between 20 and 30 percent a year in terms of the number of aircraft installed with IFC. For traditional content, the expected growth rate is in the high single digits to low double digits percent range. Davis expects previous investments in entertainment systems to continue to drive demand.

“The big one is the fact that you have thousands and thousands of airplanes flying around the world with this hardware embedded on board today in which the airlines want content installed. So there will continue to be a demand from the carries themselves from these provisions that they’ve spent millions of dollars on. The other thing is, if you look at almost every wide-body aircraft on the market today, it comes with an embedded IFE system on board. So not only is there a big installed base, but that number continues to grow,” he said.

Geographically, connectivity has developed almost opposite the path of traditional content, Davis said. Traditional content has been fairly uniform in take up around the world, with the Middle Eastern carriers and international airlines consuming the most. IFC started primarily in the United States and has grown outward from there.

With most U.S. airlines already tied up in IFC contracts, GEE is eyeing international markets as the next big stage for connectivity. Last year the company struck a unique partnership with Thaicom and Nok Air to provide Wi-Fi services on their commercial flights. Davis said the company estimates a global market of 11,000 to 13,000 airplanes as candidates for IFC, adding that the current rate of penetration is about five percent. To provide more IFC services, GEE is looking to satellite as the best technology, a move that is echoed by Gogo but still under some debate by connectivity providers worldwide.

“We’re focused on satellite; we think that the future is satellite-based systems. Whether there’s Air-To-Ground (ATG) or other things here or there, potentially yes, but everything now is sort of satellite-driven,” he said.

Davis noted the spectrum challenges associated with ATG across multiple nations make this approach extremely complicated, singling out Western Europe where he said flight paths over multiple countries, all with their own sets of regulations, could make ATG difficult to achieve.

Regarding business models for monetizing IFC, Davis expects most of the decision making will come from the airlines. GEE’s largest customer, Southwest Airlines, charges passengers for Internet access while offering live TV as a free product. Another customer, Norwegian Shuttle, has installed GEE connectivity on more than 70 aircraft, and has opted to provide in-flight broadband for free as part of its core value proposition. Whatever the approach, Davis showed confidence that both traditional content and IFC will be desired services for airlines.

“As recently as 2012 or 2013 there was still a debate among aircraft carriers around the world as to whether [IFC] was something they want to invest in as far as dollar amount as well as just operating this kind of network,” he said. “I think that’s changed. I think it’s almost a given now among most carriers around the world that this is something that passengers expect. In order to remain competitive they are going to have to be able to offer in-flight connectivity in the way they offer other amenities.”

Juliet Van Wagenen contributed to this story.