I’m happily ensconced in my hotel room in Mukilteo, breathlessly awaiting tomorrow’s WAEA single focus workshop on connectivity (and anxiously awaiting some fish and chips from next door).
Okay, “breathlessly” might be pushing things a tad, but I must admit I am excited about tomorrow’s event. There is so much going on in the world of IFE&C. And without a doubt, connectivity is hot, hot, hot!!!
But the question remains – who is going to pay? I’ve asked industry consultant and former WAEA executive director Richard Owen to give us his two cents as everyone gets ready to kick off the conference. Here is Richard in his own words.
Connectivity makes IFE a high stakes game
My good friend and industry expert Rich Salter was quoted by Flight Global last week as saying that ‘pay-per-view models in IFE & connectivity had come of age’. I think Rich was right, that the industry has been experimenting with connectivity pricing models since the Connexion by Boeing days and are starting to gather some valid customer data about the ‘sweet’ points of pricing. But it’s too early to declare one model the winner.
That’s what makes this week’s connectivity workshop in Seattle so timely. Overshadowing all of the technical and marketing presentations by industry players will be the question of how much will customers actually pay -sustainably -for in-flight connectivity.
Some of the companies at the forefront of the race, such as Aircell, have been commercially offering connectivity long enough to start generating uptake data. Combine that with the customer data brought to the table by the traditional PPV IFE offering of Live TV, Panasonic, Thales and the many airline customers they serve and you get fodder for a great debate in Seattle.
No one argues that connectivity represents a huge growth market for the IFE niche of aviation. Several industry sources say that connectivity alone could represent half of the value of the IFE segment in the next few years. That’s transformational.
Whether that growth turns out to be twenty-five, fifty or one hundred percent, it’s enticing new entrants into the marketplace. But make no mistake that this is not all new money being spent by the airlines. IMDC noted last month that IFEC hardware expenditures (yes, including connectivity) will be down 20% in 2009 and take several years to return to 2008 levels.
If you like to think strategically and enjoy matching up current and new industry partners, this is a fun time to be at the table. It’s a high stakes game in which a few will win big financially and a few others will lose their shirt. Many more will pick up incremental pieces of business, while others will exit the market.
I would argue that for the rest of us, there will be some great marketplace lessons regarding how customers respond to connectivity pricing. Lessons that can be applied to PPV movies, meals and duty free shopping. I just wish I could remember where I put that darn crystal ball.