ANALYSIS: Global Eagle to adopt fresh IFE business model

Washington DC
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Airlines around the world have clearly demonstrated that they see the merits of installing connectivity equipment on their aircraft, whether it be a standalone feature or integrated with an embedded in-flight entertainment (IFE) system. But Global Eagle Acquisition is determined to take the IFE to a new level by providing both content and connectivity together, with its $430 million acquisition of California-based Row 44 and a 86% stake in German content expert Advanced Inflight Alliance.

The company, which will be re-named Global Eagle Entertainment after the transaction closes in January, plans to stream content wirelessly through passengers' personal electronic devices and create an "entertainment-in-motion powerhouse" in the process, say its founders. It will achieve this by using a business model that allows it to take control of both the content that goes onto the devices as well as the actual satellite link that delivers that content.

Several players in the in-flight entertainment and connectivity market are already providing wireless IFE to passengers today, including Row 44 as well as competitors Gogo, OnAir, Lufthansa Systems and Panasonic Avionics. Global Eagle acknowledges that it is not providing a brand-new technology with wireless IFE. Instead, it is the business model that it claims is unique. The company will essentially be bringing together content and connectivity providers that more or less would have worked side by side instead of under the same umbrella company.

The type of entertainment platform that will emerge from this new venture remains to be seen. The new company plans to file a proxy statement to the US Securities and Exchange Commission with more details on the business this week. What is certain is that the company will have a large market to address.

New research from IMS Research projects that out of 15,300 aircraft connected at the end of 2021, 39% of aircraft will be equipped with Ka-band connections and 28% will have Ku-band installations. However, in the near future, Ku-band will prevail with 36% of connected aircraft and 12% offering Ka-band at the end of 2016, the research firm says. Ka-band connectivity is expected to launch next year for the commercial aviation industry on JetBlue's fleet with technology from ViaSat, followed by Inmarsat's Global Xpress platform in early 2015.

"The growth of connectivity and wireless IFE will continue through the next decade, with over 13,000 wi-fi-enabled, and 8,500 wireless IFE-enabled aircraft projected to be flying by the end of 2021," says IMS Research. "With such a large market to be addressed, Global Eagle's $430 million investment may well prove to be shrewd."

Global Eagle's founders Harry Sloan and Jeff Sagansky are veterans of the entertainment world and set up Global Eagle with the intent of acquiring a media company poised for growth potential. Sloan is the former chairman and chief executive of Metro-Goldwyn Mayer Studios (MGM), and Sagansky is equally prolific in the industry, serving as former president of CBS and Sony Pictures Entertainment. In their eyes, sending information to aircraft is only part of a successful business model.

Sloan says that although passengers are hungry for more and more bandwidth onboard aircraft, providing the actual wi-fi is only part of a larger equation of providing a viable entertainment platform.

"Connectivity is only a delivery platform, and we believe that the successful player in this field will control and develop the best content," said Sloan on an 8 November investor call.

Global Eagle will therefore strive to be a prime content provider, as well as a company that can perform wi-fi installations.

"As more and more of the 3 billion airline passengers have an internet connection, many through our Row 44 technology, AIA will aggregate and expand its content offering dramatically to this growing marketplace, with help from Jeff and I and Global Eagle," says Sloan.

Row 44 is no stranger to providing installations to airlines. Its Ku-band platform is installed on more than 400 aircraft, many of which are in Southwest Airlines' fleet. It has also started branching out to offer wireless entertainment through streaming video channels and on-demand options, which provides a working foundation for Global Eagle's future offerings.

Southwest Airlines is equipping its fleet with Ku-band service and also using the live television service, which streams live channels to personal devices. Russia's UTair is the second airline to choose the service, with plans to install it on its Boeing 737 and 767 aircraft in the third quarter of 2013.

In October, Allegiant Air signed up for a different version of the streaming service for its Boeing 757s travelling from the USA to Hawaii. That version does not require a satellite wi-fi connection throughout the aircraft, but rather utilises an onboard server to stream content within the aircraft locally.