Show me the money, says IFE expert

I recently wrote a Flight feature about how airlines are turning to in-flight entertainment and connectivity to drive fresh ancillary revenue streams. But is there really big cash to be made? One IFE expert with deep knowledge of the industry doesn’t think so by any stretch.

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Here is a little food for thought for those of you keeping an eye on the industry, or readying to hop a plane to Long Beach for WAEA. Comments, as always, are welcome.

“Over the past few weeks I have read so many different reports about how the market for connectivity is going to worth billions. The reality is somewhat different. With airlines trying to survive the current squeeze and using the opportunity to ‘bury any other baggage they have’ connectivity particularly is not top of the agenda.

“It is a great achievement for the industry that Aircell, AeroMobile and OnAir are all flying and we finally have a sustainable approach to connectivity. However, the market prospect has been over-hyped. The figures do not add up.

“A handful of airlines will operate various forms of connectivity during 2009. The product will be successful in certain market, but the reality is that financially, it is no big deal. It is like having 2-3 extra items on the duty free trolley. However, as various companies look to get investment, the market is being talked up all the time. By the end of next week in Long Beach it will probably be a case of one wafer mint too much.

“The focus on connectivity is hiding major changes in IFE content and hardware. Content companies are consolidating and realising that there is no room for a ‘middle man’. Weight constraints and threat of portables (which was over hyped) has kicked IFE hardware into shape.

“The latest systems are 30-40% lighter and providing 3 times the content of the previous generation. This is before the latest competitors come out of China with ultra-high tech and low cost.”

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3 Responses to Show me the money, says IFE expert

  1. lj September 5, 2008 at 1:53 pm #

    The numbers may indeed be over-blown, and this is often for self-serving reasons. The defense against this is for the industry to not buy into it by believing hyped up and impossible claims, but instead to make sure the business model is sustainable. This means to tread lightly in the roll-out of any such service. The failure of Connexion by Boeing was partly due to their uncontrolled costs, having 600 employees, deploying infrastructure ahead of market, and giving away or self-financing the equipment. The same thing killed Claircom. Are Aircell (300 employees?) now going down a similar path, offering to carry ‘zero down’ financing? This approach is risky. If the market cannot be monetized on schedule, then the financing sources get cold feet even before they are really engaged; such an approach can kill the company concerned. The key pointers to this are three: First: Huge predictions of sales and installations, performance and profits, Second: deployment of an expensive infrastructure in advance of market, Third: overly aggressive financing offers. Those who do not learn from history are condemned to repeat it…

  2. Mary Kirby September 5, 2008 at 2:26 pm #

    A key quote from LiveTV: “You have to come [to the boardroom] with your ‘A’ game. You’d better come with capital and you’d better come with a strong story as a vendor. That’s weeding people out quickly.”

  3. Joyce S. Crawford December 5, 2009 at 5:31 am #

    I am really impressed with the broad message of your blog. It is easy to determine that you are passionate about your writing. I wish I possessed your ability to write. I look forward to more updates and will be back.

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