New Articles | Satellite imagery

When bigger isn't better

New technologies threaten DigitalGlobe's business

|SEATTLE

By G.F.

AT FIRST glance, DigitalGlobe, an American satellite-imagery firm, paints an upbeat picture for investors. In its most recent quarterly earnings, released last week, the company met analysts' predictions, producing only a very slim loss of around $100,000. It seems to have good prospects for the future too. It has already secured $600m in contracts for the next 12 months, equal to around 30% of the global market for satellite imagery. And in October it activated its newest satellite, which can produce the highest definition images produced by any similar service currently available.

However, on closer inspection, the firm is not quite as healthy as it may first appear. Just under four-fifths of its revenues in the next year will come from the American government—and most of that from a single organisation, the National Geospatial-Intelligence Agency. Because those contracts are subject to annual renewals, the firm's future sales are therefore more uncertain than they may first appear. Partly as the result of this over-reliance on one customer, DigitalGlobe's share price has fallen by 35% since January.

The firm's executives hope that its newest satellite, WorldView-3, can turn the company's fortunes around. This piece of kit can produce images in both visible and infrared light, allowing it to "see" through forest fires and perform tasks such as measuring the moisture content of soil. It can also produce pictures in far higher resolution than its competitors: each dot in its images represents a 31cm by 31cm patch of the earth's surface—which no other commercial satellite in the world can match. And next year, it will be joined next year by a more advanced version, WorldView-4.

DigitalGlobe's business model, however, will come under pressure from new technologies soon. Pilotless drones can provide better pictures than satellites, with a resolution of as little as 2cm. And small-scale satellites, which are much cheaper to run than their larger cousins, range from 90cm to five metres in resolution. At least nine firms are planning to put networks of small satellites into orbit, some of which have already started launching them. One, Skybox, was purchased by Google, an internet giant, for $500m in June 2014. It plans to build a network of 24 satellites—with two already launched—over the next few years.

These new technologies will inevitably reduce the cost of imaging, which will boost demand for these services worldwide. More companies are likely to make use of satellites to compile data, such as the number of cars in any shopping mall worldwide, or the current location of every ship at sea. However, in this new world, imaging firms such as DigitalGlobe that make their money from traditional satellites will have to make do with a smaller share of the pie.