Dave Davis on the Current State of In-Flight Connectivity and Its Future – Part 2
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Global Eagle Entertainment’s former chief executive officer, Dave Davis, spoke to APEX Media to give his unfiltered thoughts on the current state of satellite services and in-flight connectivity and what he thinks will happen in the near and distant future.
…continued from Part 1
Moving on to connectivity providers, are current in-flight Wi-Fi pricing models irrational?
Whether they are irrational or not is difficult to say because people have different reasons for doing things, but they appear to be largely uneconomical right now. There’s people subsidizing equipment to a large extent and it seems difficult that they’re going to figure out how to generate a payback. That’s the result of there being a fixed number of airplanes in the world and people are in land grab mentality to get on as many aircraft as possible. So I don’t think that anyone so far has come up with a sustainable model for making money in in-flight connectivity on a consistent basis. I think there’s certain airlines in certain places that I’m sure are profitable, but if you look at the business overall it essentially consumes cash right now. So that’s back to this thesis that bandwidth costs have to continue to drop, antenna costs need to come down, and there needs to be some rationalization about the supplier base to change the profitability of this business.
Are the big connectivity providers doing enough to cash in on in-flight retailing opportunities such as real-time pricing and transaction processing?
That’s a good question, which is almost a broader one: has anybody completely cracked the code on what business model really works? I think there’s much more, from an advertising, sponsorship and onboard retail standpoint, than is being done today. These are hard problems, it’s difficult to have enough inventory across enough airlines to make it interesting to enough advertisers. It’s also difficult to get viewership information and data, which is what advertisers want to see before they buy. That code needs to be cracked. Everybody talks about the captive audience, eyeballs sitting on a seat for hours and all that’s true. I just don’t think a complete package has been put together yet where you’ve got a mix of advertising, retail, Wi-Fi and all the other stuff you can do on the system put together in a way that delivers value to the airline or service provider. The industry is working through it and trying to come up with models and different things, but I just don’t think it’s there yet.
Is enough being done to fulfill the promise of personalization within in-flight entertainment and connectivity?
I think personalization might be the greatest promise of all, because airlines have got significant data on passengers through their frequent flyer programs. They should be able to tailor the in-seat product to that passenger. I’m not aware of everything that’s out there, but I haven’t seen a lot of progress in that world over the last couple of years. I don’t know anybody who’s delivering seat-centric advertising based on X, Y or Z, based on a particular seat. The promise is there, but I haven’t see it done so far.
How much of a threat would an extended in-flight electronics ban be for the in-flight connectivity industry? ViaSat and Inmarsat recently played down the threat to their businesses.
I think the devil is in the details. If there’s an extended ban on laptops only, the impact will be somewhat muted, because if you can take your tablet or iPhone on board, a lot of the purchases are done via handheld devices anyway. If the ban is sustained and it goes down to the smaller devices, then you start to potentially have a huge impact on the business. I’ve spent most of my career in commercial aviation and just don’t see how this kind of a ban is practical or sustainable. Airlines aren’t equipped to have some very significant increase in the number of checked bags that passengers suddenly begin bringing when they can’t take their devices on board. I just don’t understand practically how this kind of a ban really works. One of the issues is: does it have a favorable impact on seatback systems? If you don’t have your device, do you watch the seatback screen more? Is there more content consumed? Possibly, there’s some benefit to that side of the business.
What does in-flight connectivity look like 10 years from now?
Ten years is quite far away and a lot can happen. I think the trends are that essentially most commercial aircraft are going to have in-flight connectivity. It’s going to be expected just like when you check in to your hotel, you’re going to need to be connected and all airlines are going to need to offer it. I think it will be widely available, but it’s also very likely that it’s going to be free under some sort of tiered system where passengers get access to it as part of the price of a ticket. Passengers just expect that, it’s happening everywhere on the ground and they’re expecting it wherever they are. I also think that with some of these new satellite constellations that you’re going to have very high capacity, which means the ability to do the kind of thing you want to do on the ground while also in the air. I don’t see any reasons or signs that the installations or availability of in-flight connectivity are going to slow in any way. The other aspect that is going to evolve is more real-time aircraft data that is delivered via these connectivity systems and airlines finding innovative things to do with this data to reduce operating costs and improve efficiency.
Finally, what’s next on the horizon for you?
I’m looking at a number of different things right now. One of the things I’ve been focusing on is an investment fund that I started with a partner. We’re looking at investing in assets across different aspects of the satellite, connectivity and telecoms space. I’m focused on that right now as well as some other side interests that I’ve got going.