While a global economic credit crunch has affected many industries and many countries grapple with debt problems, the satellite industry continues to perform well, although growth was slowed in 2009. The State of the Satellite Industry Report, prepared by Futron. Corp for the Satellite Industry Association (SIA), provides a compelling snapshot of the industry across a variety of sectors and metrics.
According to the report, worldwide satellite industry revenues were nearly $161 billion in 2009, an increase of 11 percent compared to 2008. This was the slowest growth since 2004-2005, however, the bigger picture is still promising, as worldwide satellite industry revenues have virtually doubled from 2004 to 2009.
“We see the same trends continuing in the next year,” says Andrea Maleter, technical director, Futron. “Despite the anticipation that consumer spending patterns might have negatively impacted discretionary spending in areas such as direct-to-home television, a major part of the satellite revenue base, this area has continued to grow, driving not only services revenues but also demand for new satellites, launchers and user equipment.
According to the SIA, revenues from the satellite manufacturing sector reached $13.5 billion, a 29 percent increase compared to 2008. “Futron counted 41 commercial GEO satellite orders announced in 2009, nearly double the numbers of 2008,” Maleter says. “We have seen 19 so far in 2010 (including the three Inmarsat Ka-band satellites ordered from Boeing), so I think we’re on the path to another strong year. This does not include the Iridium constellation, which is another very large addition. .”
Satellite service revenues grow by more than 10 percent in 2009, reaching $93 billion, compared to $84 billion in 2008. Revenues in this area have doubled between 2004 and 2009. Revenues derived from launch services reach $4.5 billion in 2009, an 18 percent increase from to 2008.
The biggest revenue percentage increase in the last few years has occurred in the ground equipment segment. In 2004, worldwide revenues from ground equipment services were less than $23 billion. By 2009, revenues reached $49.9 billion, with an 8 percent increase compared to 2008. For the first time, the ground equipment segment represents more than 30 percent of overall industry revenues. Satellite services still account for the majority of revenues, representing 58 percent of the sector total.
Paris-based consultancy, Euroconsult also paints a bright picture for the satellite business in its “Satellite Communications & Broadcasting Markets Survey, Forecasts to 2019.” According to Euroconsult, 2009 was a record year for satellite procurements by FSS operators, with more 30 new orders. The largest campaigns are by Intelsat, SES and Eutelsat, with 22 total satellites ordered.
Euroconsult says capacity leased by the four leading operators totalled around 3,725 transponders, for a market share of 65 percent, and a net increase of 150 transponders. Regional operators added about 300 transponders in 2009 for a total of more than 2,000 transponders leased — increasing their market share from 33 percent to 35 percent in two years. Fast-growing regional operators such as Arabsat, Spacecom, RSCC, Star One and Singtel Optus benefited from strong dynamics in their respective emerging markets.
Prospects for the FSS sector “remain solid,” says Pacome Revillon, managing director, Euroconsult. “Last year, a slowdown was observed, with a 5.3 percent revenue growth for operators. Worth noticing, reasons for the slowdown were multiple, and included limited additions of capacity supply. Still, we saw, for example, a lower number of satellite pay-TV platforms entering the market, which impacted market growth in certain areas. In 2010-2011, we anticipate a growth of 5 percent to 6 percent, with sustained demand for broadcasting and communication services.”

Manufacturing

The satellite manufacturing sector grew revenues by nearly a third in 2009, and global revenues grew by more than 60 percent between 2004 and 2009, according to SIA statistics. 2009, in particular, was a very good year for U.S. satellite manufacturers, with revenues more than doubling, increasing the U.S. share of global revenues from 30 percent in 2008 to 57 percent in 2009. According to SIA, there were 41 commercial GEO satellite orders, which was almost double the number of orders in 2008. U.S. manufacturers won 19, or 46 percent, while. European manufacturers gained 12 orders, or 29 percent. The remaining 10 were split among Russian, Chinese, Canadian and Japanese manufacturers.

Launch Services

The launch services market posted a nearly 20 percent revenue increase in 2009 compared to 2008. The number of commercially procured launches slipped from 49 in 2009 to 46 in 2008, but average revenue per launch increased. U.S. launch revenues increased by almost 80 percent compared to 2008, reaching $1.9 billion in 2009, compared to $1.1 billion. The increase was based on commercially-procured launches for U.S. government clients.
“We think there will be around 70 to 75 launch attempts this year,” says Marco Caceres, a senior analyst at the Teal Group. “In 2011, I would be surprised if these figures change. The real activity will happen around 2013 to 2015 when you start to see more launches of Iridium and GlobalStar satellites for example. Next year, I don’t see anything that will radically change the numbers, but it might reach 80 launches next year, if it is a good year.

Broadcasting

Both Euroconsult and the SIA figures point to vibrant DTH and broadcast markets helping satellite operators. In its latest research, Euroconsult says close to 27,000 channels were broadcast by satellite in 2009, with a net increase of about 3,000 channels last year. Excluding channels broadcast on proprietary systems of DirecTV and Dish Network in the United States, the fastest-growing markets last year were Latin America, Central Europe, Russia, Central and Southern Asia (mostly India), with growth rates ranging from 9 percent to 17 percent. Euroconsult says the number of HDTV channels around the globe more than doubled in 2009 to 1,913 (excluding local networks in the United States). While 70 percent of HD channels broadcast are concentrated in the North American market, strong increases were reported in nearly all markets.
SIA said revenues from DTH/DBS services reached $71.8 billion in 2009, an 11 percent increase compared to the same stage last year, and 8 million satellite pay-TV subscribers were added in 2009, meaning the global total for satellite pay-TV subscribers has surpassed 140 million. A lot of this growth is coming from Asia and markets like India. According to the SIA, there were 30 million U.S. satellite pay-TV subscribers, or about 25 percent of the global total.

Military Versus Commercial

One of the interesting aspects is how growth in the commercial satellite market will compare to the military market. While there is talk of governments cutting defence budgets, the military space arena still has great potential, and defense budget cuts could help commercial satellite players by forcing governments to look for more creative options.
“My sense is that potential growth for commercial is greater because I think budgets for the U.S. military are very tight, and it is not going to get any better,” Caceres says. “There are concerns about debt. I sense that under [the Obama] administration, which I think is more pragmatic, they are much more willing to rely on commercial assets and then continue to make these military satellite programs work. There are so many technical problems, and they are not being fixed. They are so expensive. I think they rely more on commercial satellites,” he says.
“The commercial satellite market will continue to grow, in part because the traditional military market will increasingly use commercial systems (UAVs, hosted payloads, etc.) to meet their increasing need for bandwidth within their budgetary constraints,” says Chris Baugh, president, NSR. “Therefore, one can conclude that the military market will remain basically flat, as new growth is transferred to commercial systems. The planned pull out from Afghanistan will be closely watched as it will adversely impact military demand.  Conversely, other potential hotspots as well as the increased need for greater surveillance in light of disengagement should lead to increased demand. These factors do suggest a flat demand curve for military markets,” he says.
Revillon adds, “The military market, particularly in the United States, continues to present growth opportunities, both for the use of capacity and services and the use of hosted payloads. However, the commercial market is globally believed to present larger growth opportunities today, at least at the level of operators.”

Optimism

There is a large degree of optimism throughout the satellite sector, as growth has remained consistent. “The market niches that satellites serve have been stable thus far. For instance, broadband access and wireless backhaul were relatively unscathed, and specific companies even posted healthy gains during these difficult economic times. Traditional breadwinners such as DTH will continue to hold ground with most DTH operators having had their best years during the recession. New channels, HD and 3-D (in selected countries) will drive transponder uptake,” says Baugh.
“In the MSS sector, companies mentioned that 2008 appeared to be the slowest year in terms of equipment installations and service revenues, 2009 was slightly better, and 2010 has been better than 2009, so far. As with all other sectors, satellite companies who adapted to a changing environment have seen positive overall growth, but negative-to-flat growth appears to be behind us,” Baugh says.
Caceres adds, “I am generally optimistic. I think during the past three to four years, you are seeing a number of new satellites being proposed. More satellites are being launched, and more satellites are being ordered. You are still seeing most of that business within the traditional sector, so the big companies. I am not seeing a lot of momentum in terms of new startup companies. I think the economic situation is impacting the introduction of new players into the market, but the satellites that are up there for the big companies need to be replaced, so you are seeing an upcycle in replenishments.”