Global IFEC Market Overview - Inmarsat Aviation Conference 12th June 2013, San Diego
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“We Accelerate Growth”
Global IFEC Market Overview
Inmarsat Aviation Conference
12th June 2013, San Diego
Lida Mantzavinou
ConsultantAgenda
Market Drivers Trends
Overview Restraints & Conclusions
Challenges Supply Chain
Is the market What are the How will the
growing, for how DRC of trends impact the
long will it hardware, way of doing
continue to grow content and business? What
and at connectivity are the evolving
what rate? segments? business models ?
2Market Overview
The Global IFEC market is expected to grow from $2Bn in 2012 to
$5.3Bn in 2020 with a CAGR 12.8%, connectivity is driving the growth
% Revenue Split per Segment
Global IFEC Market Global IFEC Market
2012 2020
Connectivity Content Hardware Connectivity Content Hardware
20%
48% 44%
12%
68%
8%
• All three segments are expected to grow in value, with connectivity segment having the highest growth potential reaching
$2.4bn revenues in 2020. New IFE solutions are emerging leveraging on smartphone and tablet proliferation and on on-line
streaming solutions.
• The hardware segment will be the largest IFE segment in value during the forecast period with CAGR of 7.5%. However, its
share in the total IFE market is expected to decline from 68% in 2012 to 48% in 2020 as connectivity segment gains market
share and as a growing number of PEDs are being carried by passengers in the medium and long term.
• Strong consolidation in the IFE market with 2-3 key players in each market segment and one stop shop creation
Note: All figures are rounded. The base year is 2011. Source: Frost & Sullivan analysis.
3Drivers and Restraints
Global IFEC Market: Key Market Drivers and Restraints, 2012–2020
1-2 years 3-4 years 5-9 years
Growing demand for air transport and strong
aircraft orders will boost the IFEC market
Market Drivers
Growing competition between airlines – IFEC
treated as a competitive advantage
PED proliferation - New IFEC solutions emerging
Fast technological change makes airlines reluctant
Market Restraints
to invest in the short term- waiting for the best
solution offered
Unstable economic environment - Airlines’
investment budget delays IFEC installation plans
Long and expensive development, certification and
installation processes
Impact: High Medium Low Source: Frost & Sullivan analysis.
4Main Market Challenges for Suppliers
Connectivity:
Price, speed,
capacity , Connectivity:
coverage Heavy investments Hardware:
and long payback HW providers
period competing on price Content:
and operating cost Need for greater file
benefits storage; security
requirements on early-
window content
• In flight connectivity is currently facing four challenges: price (high), speed (low), capacity (limited satelite capabilities) and
coverage (limited). Suppliers have been building their competitive advantage on one of these aspects. Only in the medium
term a supplier will be able to offer a complete package of fast and affordable connectivity with global coverage.
• Ka-band technology is expected to be the main technology for in-flight connectivity due to high speed, wider coverage and
available capacity. However, heavy investments and a long payback period currently required; a Ku-Ka band hybrid
emerging in the short term.
• HW suppliers are competing by offering lighter and low energy consumption products to remain attractive in the market. The
ones that are contracted suppliers of aircraft manufacturers are leading the market.
• CSP capital expenditure will rise due to the need for greater digital file storage; security requirements become a hurdle.
5Key IFEC Market Trends
Key Trends Features & Implications
• Existing ground-based technologies such as ATG and satellite-based
Connectivity is technologies (L-band, Ku-band, Ka-band) are increasingly explored by airlines.
driving the
market Ka-band is expected to be the main offer in the market due to lower costs and
larger coverage by 2015; ATG will be the preferred option for regional operations
• Aircraft equipped with PEDs, (EFBs and crew tablets) for business operational
Paperless air
transport industry purposes transforming the way the airline operates on air; Connectivity will enable
target real time sharing of information. Strong operational benefits from aircraft systems
streaming data enabling real time health monitoring and optimum decision making
Evolution of
passenger demand • Growing popularity of smartphones and tablets is strongly impacting the IFEC
impacting IFEC market and alter the passenger experience on board. (> 50% of passengers carry
suppliers’ business
PEDs); Consumer behaviour is changing the business; In demand applications
model
that work across multiple devices and are HW agnostic
From web • Connectivity will be changing passenger’s attitude on board; web browsing and
browsing to content streaming becoming prefered activities, Suppliers have started catering
content for this demand (e,g Thales with Ava product, Panasonic with exw system, Gogo
streaming
vision)
6Evolving business Models - Connectivity
Key Trends Features & Implications
Connectivity cost • Connectivity providers aiming at providing global Ka band coverage. Prices
decreasing; Airlines expected to be lower due to lower costs; On board connectivity expected to be
offering wifi for free
offered for free due to strong ancillary revenue generation and sponsors; e.g.
to generate ancillary
revenues Google, blackberry
Connectivity
Providers • Connectivity providers merging and partnering in the long term in order to offer
merging wider coverage and wider capacity, higher speed and lower prices;
capabilities
• Increasingly airlines (regional and LCC) are finding ways of decreasing weight
Traditional HW and operational costs; IFE equipment can be removed to allow for more seats
market is
and lower operating costs; e.g. Scoot ,while offering portable devices; HW
changing
providers leveraging on connectivity to offer content streaming solutions
Connectivity • E.g. Part of Row 44 and AIA merged under the Global Eagle Entertainment.
providers partnering
aiming to create the largest entertainment and connectivity platform for the
with Content and
HW providers
worldwide airline market
7Evolving business Models – Content & Hardware
Key Trends Features & Implications
HW providers Hardware suppliers (e.g. Panasonic, Thales) will be taking more control of
entering the content content delivery, offer exclusive content (e.g. sports, Live TV) as well as looking
and connectivity at new revenue streams for airlines (e.g. applications, analytics software) while
market focusing on developing data storage capabilities or partnering with data centers
in order to become the one-stop-shop for the end-user.
Avionics Suppliers
partnering with • Avionics suppliers offering products to enable connectivity on board; partnering
connectivity with connectivity providers to offer bundled product (e.g. Honeywell & Inmarsat)
providers
• CSPs are looking into bundling offers with portable solutions in order to overcome
Content Providers
entering portable decreasing margins and security concerns regarding PEDs in the short term.
market; offering Films are the main content delivered, focusing on early-window, and games are
bundled products increasingly becoming popular.
Content Market • Small content suppliers ($1M–$2M revenues) being targeted for acquisition by
consolidating; major CSPs (e.g. AIA, Spafax) in order to enhance portfolio with local market
Portfolio capabilities; service portfolio is expanding into ancillary revenue generation; 2-3
enhancement
players will be driving the market
8Supply Chain: IFE Segments Integrating (HW & Content)
The IFE content market has been consolidating rapidly , as HW suppliers move into content
delivery and position themselves as integrators
CUSTOMISED SERVICES
• Consolidation becomes evident in the
Branding
supply chain, as Hardware suppliers
CONTENT Safety Videos / Cards
(HWS) begin offering content to airline
SERVICE
operators. PROVIDERS Announcements
Local Content
e.g. Skyline IFE,
example, Panasonic and Row 44 are
Inflight Dublin Customer Service
now offering international content to
Destination
hardware customers, as a part of the Movies
system package or by getting into
contracts with live-television suppliers. HYBRID SUPPLIERS
Account Management
e.g. IMS, Phantom Media
• “Pure Play” CSPs fend off competition
through customisation in customer service and
non-generic tasks. HARDWARE
SUPPLIERS Audio/Movie
Database
• CSPs are expected to move to niche sections e.g. Panasonic,
of content segment (example, licensing or Thales
safety), or enter larger alliances where Live Television
economies of scale exist (buying power,
especially in movies) GENERIC SERVICES
9Conclusions
Consumer behaviour is changing fast and is driving the connectivity market. The industry
is dynamically changing to meet passenger requirements. Flexibility is key
Market consolidation will be at its peak. Vertical integration, group forming and repositioning
in the market is integral for suppliers wanting to sustain a competitive advantage.
Successful partnerships that can create a one stop shop leveraging on connectivity
segment will drive the market.
Emerging economies are gaining momentum and driving aircraft orders; Aircraft production
rates have been increasing and aircraft operators will be aiming to simplify their supply
chain and favour one stop shop solutions as part of their suppliers catalogues.
In-flight connectivity is expected to create a key competitive advantage for airlines in the
short and medium term. New products will be launched (platforms, apps) and new forms of
advertising will allow airlines to generate ancillary revenues. Suppliers and aircraft
operators need to work together to identify revenue sharing models and ROI within a 1 -1.5
years. IFEC will be treated as a value-added feature and airlines will be increasing budgets
towards IFEC investments.
Commercialisation of satelites will allow greater capacity, higher coverage, more players
and lower prices. Ka-band is expected to be the main technology for in flight connectivity in
the medium term.
10Thank you for your attention
Lida Mantzavinou
Consultant – Aerospace & Defence
Tel: +44 (0) 207 343 8368
Mon: +44 (0) 7903257958
Email: lida.mantzavinou@frost.com
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