Earth Observation to Capture the Mainstream Market
The mighty rise of smallsats will inevitably drive competition in the Earth Observation market. This will lead to delivery of new data services which, in turn, will lead to increasing demand from new customers. Within this proliferation of remote sensing satellites, not all companies will emerge as victors, but what is certain is that Earth Observation is on a steady winning streak.
Earth Observation (EO) is in its infancy, meaning that there is significant room for growth. At the same time, with the smallsat revolution in full swing, key players in the EO market are expecting to see a new level of data service offerings that will fuel demands for satellite imagery. Increased demand is driven by computer companies, the mining industry, agriculture, oil and gas, insurance companies, financial service companies, and governments, to name but a few. As data is becoming more important to the decision-making process for companies around the world, so too will demand for data climb. Enter the opportunities for remote sensing satellite operators and EO.
Between 2012 and 2016, 364 remote sensing satellites were delivered, worth $8.79 billion, explains Bill Ostrove, aerospace and defense analyst at Forecast International. These satellites are flown by commercial companies but often, especially in Europe and the United States, they are launched through large government-sponsored programs. Between 2017 and 2021, Forecast International projects 951 satellites to be delivered, worth $16.52 billion. Many of the satellites to be launched will be smallsats which have a lower cost than the larger satellites, explaining why the number of units launched will triple, while the value will only double.
“One of the advantages that smallsat operators cite in their business models is that by producing more satellites more often, they are able to integrate upgrades more quickly. For example, Planet has integrated three generations of optical sensors already since its first launch in 2014. The company is now experimenting with near-infrared. Basically, the higher number of satellites launched more frequently will speed the development of new technologies compared to larger satellites that are only launched every five to 10 years,” says Ostrove.
Competition = New Capabilities + New Services
With the proliferation of remote sensing satellites, competition will likely intensify as new players enter the market. This will force companies to develop a competitive advantage in order to get investors and customers. An example of this is how UrtheCast is developing a constellation of smallsats that pairs one optical imager and one radar imager.
This proliferation will also lead to consolidation, adds Ostrove. “In fact, we are already starting to see some consolidation taking place. Planet recently purchased Terra Bella, formerly Skybox Imaging, from Google as well as BlackBridge last year. Still, demand is growing, especially for data that is updated more frequently, hence the interest in companies like Planet.”
The provision of more frequently updated data is afforded by smallsats able to revisit a spot on Earth more frequently than in the past. Additionally, another new offering is providing services beyond raw data. With more competition in the market, satellite companies need to go an extra step in order to get business. Instead of simply providing raw data, they will use the data that they gather to provide services.
“This is partially due to the increasing influence of Silicon Valley in the industry. Startups like Planet borrow heavily from the business models of Silicon Valley. They want to provide their customers with access to usable information through the cloud,” says Ostrove.
In addition to data-based services, the quality of the data will also drive business. The market for satellite data continues to get stronger as the data improves, explains Theresa Condor, vice president of corporate development at Spire.
“New sensors are constantly being proposed, launched, tested, and put into commercial production. For Spire, that has meant an expansion from ship tracking and weather data into tracking air traffic as well. There has also been a lot of growth in downstream applications, which is a direct response to growth in the availability and reliability of the data. The growth of remote sensing satellites is great for speeding up development. Most companies are specializing into areas that had little to no previous coverage by commercial entities, which is bringing very fast innovation to industries that have been long starved for better data,” says Condor. The proliferation of downstream applications making great strides, according to Condor, includes analytics, decision making, and visualization. Greater amounts of data are clearly fueling demand but the improved capability to analyze the data and make meaningful decisions from it also plays a part.
“This means that Earth observation can help to answer questions or solve problems in a way that didn’t used to be possible,” says Condor. “The technology of Earth observation is getting better and better. A single Spire Lemur 2 satellite, which is the size of a loaf of bread, can track ships, planes, and weather. Every satellite launched can do all these things, not just one.”
A Flood of Applications
With the advances of smallsats, market players are able to develop spacecraft more quickly and at a much lower cost. Traditionally, satellite development projects were in the hundreds of millions of dollars price range and they required roughly seven to 10 years. Not only was development limited by capital expense, but as technology advanced, the satellite would become outdated or obsolete. This is a relatively new approach and allows market players to update satellites as they would software, explains Rakesh Narasimhan, Chief Operating Officer (COO) of Spaceflight Industries.
“The combination of high revisit rate, low cost and easy access will all greatly impact the growth of the EO market. And this will no longer be just for major governmental agencies; this growth will enable more organizations to take advantage of the services. Despite the proliferation of remote sensing satellites, we do not think that it will be harder to justify new investments in EO satellites. The growth of remote sensing and decreasing cost of materials has produced a flood of applications demanding this data. The diversification of the industry is creating new entry points for investors, in turn, making the market more accessible,” says Narasimhan.
Gone are the days of having to raise $500 million from large investment banks and venture groups. Smaller funds can now access the market and larger investors can hedge their bets more effectively by focusing on key technology enablers in the market. Given that EO is a nascent market and hundreds of satellites are expected to launch in the coming years, Spaceflight Industries is extremely optimistic about the market potential, according to Narasimhan.
“The number of countries entering the market speaks to its potential and growth. Euroconsult stated that in 2015, more than 50 countries invested in EO programs with total investments nearing $10 billion,” explains Narasimhan, adding that as constellations expand and grow in the number of satellites, so will there be a dramatic improvement in revisit rates, which is one of the reasons that demand has grown for remote sensing and EO data.
BlackSky aims to gather multiple images of heavily populated regions daily through its constellation. As images become more timely, there will be a number of relevant applications emerge.
“This can include humanitarian efforts, such as tracking refugee movements; monitoring maritime activity; commercial initiatives including monitoring competitor imports and exports; or observing the development of a building across the world. We are able to track deforestation, the size of the icecaps and the coastlines. The applications and possibilities are enormous, and it will be interesting to see the innovative ways organizations and companies choose to leverage data,” says Narasimhan.
With more companies looking to incorporate satellite imagery into their business strategies, the way data is packaged and delivered is becoming an important factor, says Narasimhan. Satellite image providers must realize that they must make the process as user-friendly and cost-effective as possible, while also providing relevant data to help businesses make better, informed decisions. It is this insight that is the biggest of all demand drivers in the EO market, notes Narasimhan.
“Big data has provided actionable insights that have allowed organizations to make highly informed decisions. We are now looking to collect the next generation of big data, but this time from space. Real-time information collected from space will allow companies and organizations to obtain a better understanding of what is taking place on the ground. Also, as the cost for the images and data decreases, the demand will only increase because it will be more widely available, allowing more organizations to unlock the power of these resources,” says Narasimhan.
For companies to remain competitive in the EO market, offering a catalog of high-resolution images won’t be enough, says Narasimhan. Therefore, the next big opportunity will center on how to translate those pixels into actionable insight gained from monitoring imagery and other relevant data in near real time. While growth and the demand appear to be rising in tandem, another important fact to note, adds Narasimhan, is that the demand for unmatched data will never dissipate.
“While at first glance, satellite capabilities may seem to blur together, satellite configurations can vary to include a range of different onboard sensors that can produce video, multi/hyperspectral, Synthetic Aperture Radar (SAR), Global Positioning System (GPS) radio occultation and Automatic Identification System (AIS). While there is a magnitude of satellite imagery available, no one has made it easy to access and consume. This includes offering comparisons by price, quality and responsiveness. Additionally, no one has enabled on-demand tasking of satellites for near real-time monitoring, or delivered a constellation with rapid revisit rate,” says Narasimhan.
Narasimhan believes BlackSky is addressing these issues by increasing the number of images taken daily of a specific location, selling images at nearly a tenth of the cost of the industry average, and allowing customers to discover, task, purchase and download images through a web-based, secure user interface.
“Based on our existing customer base and our inbound inquiries, Planet believes that there's a healthy demand for high frequency satellite imagery, and we view the proliferation of imaging companies as a positive sign for Earth. The more data we collect, the more insights our customers can make,” says Will Marshall, co-founder and Chief Executive Officer (CEO) of Planet.
EO: It’s not Just about Hi-Res Images
EO is often used synonymously with Earth imaging, which is a $3 billion market, according to Theresa Condor, VP of corporate development at Spire. However, EO is significantly larger than this and also covers, for example, new infrared observing systems and weather data from satellites — a market valued at twice that of Earth imaging at around $6 billion a year, explains Condor.
“Some would also add the opportunities from the Internet of Things (IoT)/Machine-to-Machine (M2M) markets that are related to sensing the Earth in situ in remote locations, as well as observing and tracking ships, planes and trucks. In combination, these are also very sizeable markets. Overall, the Earth observation market is more than $10 billion, a multiple of just optical Earth imagery. It is this latter market that is particularly crowded and competitive, yet clearly still ripe with opportunities as new companies are getting funded,” says Condor.
What precisely constitutes EO may not be known by all, but what is in agreement amongst market players is that EO and its applications are much more than hi-res images of Earth captured once a day — if not less frequently. Applications perhaps well known in wider circles include weather data gathering, agriculture, environmental observation, mining and military reconnaissance. But then there is also observation for commercial and even civil infrastructure investments.
“This includes oil and gas exploration, land cover analysis, building site selection and development, utility planning, transportation studies and city planning,” says Bill Ostrove, Aerospace and Defense Analyst at Forecast International. “[Applications also extend to] financial transactions for damage estimation for insurance claims and observing factories and stores for activity as part of an overall financial investigation, for example.”
At present, governments are the main driver of EO demand. Governments operate many remote sensing satellites, such as weather satellites and Earth science satellites. They also purchase satellite imagery from commercial companies.
“DigitalGlobe generated nearly 64 percent of revenue from the government, including the National Geo-spatial Intelligence Agency (NGA) in 2015,” says Ostrove.
While governments remain the primary buyer of both satellites and satellite imagery, revenue for the industry as a whole is expected to gradually shift toward the commercial side, says Ostrove, noting that demand for data is growing in the mining, insurance, financial services, and agriculture industries.
“Outside of government, interested companies include internet search companies, who are looking to power things such as Google Maps and Bing Maps, mining companies looking to gain insights into new and existing sites, insurance companies to evaluate claims, and financial services companies to investigate activity,” says Ostrove. VS