Given the sorry recent history of CEOs misrepresenting the health and future of their companies, it would be understandable if recent statements from individuals ranging from Romain Bausch of SES, Guiliano Beretta of Eutelsat and David McGlade of Intelsat, that their companies had yet to see any substantial impact from the major global economic downturn were to be taken with a grain of salt. Yet, NSR has recently completed its annual data collection effort of television channels and feeds carried on commercial satellites, and the actual results truly do support these assertions.
At the end of each calendar year, NSR undertakes a full tallying of every single analog, SD and HD channel carried on commercial satellites as well as analog and digital feeds. This is done on a per transponder basis and, based on NSR’s definition of the commercial satellite capacity leasing market, represents the entire demand for transponders for the global video services markets. While video distribution, DTH and video contribution do not represent the entire spectrum of applications for commercial satellite capacity, they do account for over 60% of the leased capacity and nearly 70% of revenues in the industry and are, in NSR’s view, the best baseline indicator of the actual health of the industry.
The bellwether measure for video services in the commercial satellite industry is growth in standard definition (SD) channels carried on commercial capacity. Between the end of 2007 and 2008, nearly 2,000 new SD channels were added on all commercial satellites (excluding the dedicated fleets used by DIRECTV and DISH Network). This represents a 12% increase in SD channels in the 12-month period and is similar to trends seen in previous years. Another important measure is the growth in the much acclaimed HD segment. Here, the global number of HD channels nearly doubled between the end of 2007 and 2008. In real terms, HD channels only represent a small fraction of the market compared to SD channels, but still each new HD channel uses several times as much capacity as its SD cousin and often represents long-term contracts with the biggest names in the broadcasting industry.
In capacity terms, full or partial transponders employed for carriage of video services increased by about 5%, or 150. It is normal for the growth in capacity demand to come in at a lower rate than SD and HD channel growth for two main reasons. First, there are still a fairly large number of analog channels and feeds being carried on commercial satellites and, as has been the case for many years now, these analog channels and feeds are on the decline with their capacity often being recycled directly for the carriage of new digital channels or feeds. Also, NSR has noted a substantial increase in the number of transponders employing the MPEG-4 compression standard, which allows more channels and feeds to be carried per leased MHz of capacity.
Overall, a 5% gain in full or partial transponders used for video services represents a roughly average increase compared to past years and fully supports the current optimism from the industry CEOs that the commercial satellite sector is positioned to weather the sour economic environment relatively unscathed. After all, there does seem a good bit of truth in the assumption that when discretionary spending goes down on items like travel, restaurants or hobbies, people do turn on the television to fill their free time. Of course, the old caveat in investment circles of "past performance is not indicative of future results" holds true for the commercial satellite industry. Nonetheless, NSR is relatively optimistic that 2009 should be a reasonably successful year for the industry as well. Recent and soon-to-occur satellite launches such as Nimiq-4, Astra-1M, Ciel-2, Telstar-11N and Measat 3a are all satellites with substantial pre-launch contracts, often for video distribution or DTH services, that will contribute to growth in the coming year. Further, established markets like broadband VSAT services, cellular backhaul and government/military clients are unlikely to see major changes beyond a possibility of a slight slowdown in the coming 12 months, at worst.
The only area where NSR sees the potential for a substantial flight away from satellite in the coming year is for international trunking services mainly to/from Africa as a number of new undersea cables enter service on the west and east coast of the continent. Yet even here, the timing and level of the impact of the commercial satellite industry is open to debate.
In its recently published Global Assessment of Satellite Demand, 5th Edition study, NSR projected only a slight slowdown in transponder and revenue demand growth in the 2009-2010 period with an actual contraction in demand being very unlikely. Further, the above mentioned wave of new satellite launches in the 2009-2010 timeframe could be well-timed for an eventual economic upturn in 2010-2011 that would lead to a spike in capacity demand. Between 2007 and 2017, NSR currently forecasts that global demand for commercial C- and Ku-band transponders will increase by more than 1,500 36 MHz transponder equivalents and revenues will grow at the average annual rate of 4.5%. Given the rough ride that other technology and investment sectors have been through in the last year and are likely to face in the coming year, the satellite industry should well be counting its blessings. Unlike the last technology bubble that severely impacted the commercial transponder leasing sector, the satellite industry appears much better positioned to not only survive, but thrive, in the year ahead.
Information for this article was extracted from the NSR report entitled: Global Assessment of Satellite Demand, 5th Edition For more information go www.nsr.com
