State of the Satellite Industry Report Prepared by: October 2017 Prepared by: Formerly Tauri Group Space and Technology Satellite Industry Association: 21 Years as the Voice of the U.S. Satellite Industry SIA MEMBER COMPANIES Prepared by: 2 Formerly Tauri Group Space and Technology Study Overview • SIA’s 20th annual study of satellite industry data • Performed by Bryce Space and Technology • Reports on 2016 activity derived from unique data sets, including proprietary surveys, in-depth public information, and independent analysis • All data are global, unless otherwise noted • Prior year revenues are not adjusted for inflation Prepared by: 3 Formerly Tauri Group Space and Technology 2016 Satellite Industry Indicators Summary Mobile ($3.6) Earth Observation Services ($2.0B) Ground Fixed Equipment* $17.4 $127.7B Satellite Services $260.5B 2016 Global Revenues 0.2% $5.0 13% $104.7 $13.9B Satellite Consumer Non-U.S. 2% Satellite Network Manufacturing Services Consumer (Non-GNSS) $8.9 U.S. Growth 2015 − 2016 $113.4B Non-U.S. Ground $3.3 Equipment* $5.5B 7% Launch Launch $2.2 Industry U.S. Satellite GNSS* 2% Manufacturing Prepared by: *Ground equipment revenues include the entire GNSS segment: stand‐alone navigation devices and GNSS chipsets supporting location‐based services in mobile devices; traffic information systems; aircraft avionics, maritime, surveying, and rail . 4 Formerly Tauri Group Space and Technology Global Satellite Industry Revenues Global Satellite Industry Revenues ($ Billions) $300 $250 $200 $150 2X $247 $255 $261 $ Billions $231 $100 $210 $168 $177 $144 $161 $122 $50 Ten-Year Global Industry Growth $0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Growth Rate 15% 19% 11% 5% 6% 18%* 10% 7% 3% 2% Global satellite industry grew 2% in 2016, below worldwide economic growth (3.1%) and slightly above the U.S. growth (1.6%) Prepared by: *Beginning with 2012, ground equipment revenues include the entire GNSS segment: stand‐alone navigation devices and GNSS chipsets supporting location‐based services in mobile devices; traffic information systems; aircraft avionics, 5 maritime, surveying, and rail. Formerly Tauri Group Space and Technology U.S. Portion of Global Satellite Industry Revenues $300 Total: Total: Total: $254.8B $260.5B Total: $246.6B $250 Total: $230.9B $209.2B Average yearly Non-U.S. $200 U.S. market share 150.2 Satellite 141.5 146.9 129.6 Industry 44% $150 118.1 $ Billions of global $100 U.S. industry Satellite $110.3 Industry $50 $91.0 $101.3 $105.0 $107.9 $0 2012 2013 2014 2015 2016 Growth Rate 18% 10% 7% 3% 2% U.S. Growth 19% 11% 4% 3% 2% Non-U.S. Growth 17% 10% 9% 4% 2% Prepared by: 6 Formerly Tauri Group Space and Technology The Satellite Industry in Context Telecommunications • Television • Telephone Non-Satellite • Broadband Industry • Aviation $84B • Maritime $344.5B Satellite • Road and Rail Services Earth Observation Global Space $260.5B • Agriculture Economy $127.7B • Change Detection Satellite • Disaster Mitigation Industry 1% • Meteorology (77% of Space • Resources Economy) Growth Science 2015 − 2016 • Earth Science • Space Science Ground Equipment National Security $113.4B 2% Satellite Manufacturing Core of the Space Growth Launch Industry Industrial Base 2015 − 2016 Consumer Equipment • Sat TV, radio, and broadband equipment Network • Gateways • NOCs • GNSS stand-alone units & in-vehicle systems • VSATs • SNG equipment • GNSS chipsets (beginning with the 2017 report) Equipment Prepared by: Notes: Network operations centers (NOCs), satellite news gathering (SNG), very small aperture terminal (VSAT) equipment, global navigation satellite systems (GNSS) 7 Formerly Tauri Group Space and Technology The Satellite Network in Context Operational Satellites by Function (as of December 31, 2016) • Number of satellites increased 47% Non-Profit Communications (1%) over 5 years (from 994 in 2012) Meteorology Space observation (1%) » Satellites launched 2012 — 2016 Scientific increased 53% over previous 5 years 2% Navigation Commercial » Average 144/year 5% Communications » Due mostly to small/very small 7% Military satellites in LEO (<1200 kg) Surveillance » Average operational lives of larger 6% 35% (mostly communications) satellites 1,459 becoming longer, exceeding 15 years; Total Operational 247 active sats launched before 2002 R&D 12% Satellites » 520 satellites in GEO (mostly communications) • 59 countries with operators of at least 14% one satellite (some in regional 19% consortia) Government Communications Earth Observation • U.S. entities operate 594 satellites Prepared by: 8 Formerly Tauri Group Space and Technology Top-Level Global Satellite Industry Findings • Satellite industry revenue was $260.5 billion in 2016 • Overall industry growth of 2% worldwide • Two of four satellite industry segments posted meaningful growth Satellite services: the largest segment; revenues remained flat 0.2% Consumer services continue to be a key driver for the overall satellite industry Satellite manufacturing revenues decreased by 13% 13% Fewer satellites launched in 2016, reflecting replacement cycles approaching an end and a bottleneck in immediate availability of launch services Launch industry revenues grew by 2% 2% Several launches deploying government-manufactured payloads contributed to moderate growth Ground equipment revenues grew by 7% 7% Growth in GNSS and network equipment, consumer equipment remaining flat Prepared by: 9 Formerly Tauri Group Space and Technology Satellite Industry Segments Satellite Services • Consumer Services » Satellite Television » Satellite Radio » Satellite Broadband • Fixed Satellite Services » Transponder Agreements » Managed Network Services (including in-flight services) • Mobile Satellite Services • Earth Observation Services Prepared by: 10 Formerly Tauri Group Space and Technology Global Satellite Services Revenue $130 $120 Earth $110 Observation $100 $90 Mobile $80 0.2% $70 Fixed $ Billions $60 $50 2015 − 2016 $40 Consumer Global $30 Growth $20 $10 $0 2012 2013 2014 2015 2016 Growth Rate 5% 5% 4% 4% 0.2% Total $113.5 $118.6 $122.9 $127.4 $127.7 The U.S. share of Consumer $93.3 $98.1 $100.9 $104.3 $104.7 satellite services Satellite TV (DBS/DTH) $88.4 $92.6 $95.0 $97.8 $97.7 revenue in 2016 Satellite Radio (DARS) $3.4 $3.8 $4.2 $4.6 $5.0 was Satellite Broadband $1.5 $1.7 $1.8 $1.9 $2.0 Fixed $16.4 $16.4 $17.1 $17.9 $17.4 Transponder Agreements (1) $11.8 $11.8 $12.3 $12.4 $11.2 40% Managed Services (2) $4.6 $4.6 $4.8 $5.5 $6.2 Mobile $2.4 $2.6 $3.3 $3.4 $3.6 Prepared by: Earth Observation $1.3 $1.5 $1.6 $1.8 $2.0 Notes: Numbers may not sum exactly due to rounding. (1) Includes capacity for DTH satellite TV and some mobility service platforms. (2) Includes VSAT, mobility, and in-flight connectivity. 11 Formerly Tauri Group Space and Technology U.S. Satellite Services Revenue $60 Earth Observation $50 Mobile $40 2% $30 Fixed $ Billions $20 2015 − 2016 Consumer U.S. $10 Growth $0 2012 2013 2014 2015 2016 Growth Rate 6% 3% 4% 5% -2% Total $47.2 $48.7 $50.9 $53.3 $52.1 The U.S. share of Consumer $42.3 $44.0 $46.0 $48.0 $46.4 global satellite Satellite TV (DBS/DTH) $37.5 $38.6 $40.1 $41.7 $39.7 services revenue Satellite Radio (DARS) $3.4 $3.8 $4.2 $4.6 $5.0 in 2016 was Satellite Broadband $1.4 $1.6 $1.7 $1.7 $1.7 Fixed $3.7 $3.7 $3.8 $4.1 $4.4 Transponder Agreements (1) $0.3 $0.3 $0.3 $0.3 $0.3 40% Managed Services (2) $3.4 $3.4 $3.5 $3.8 $4.1 Mobile $0.4 $0.4 $0.4 $0.5 $0.5 Prepared by: Earth Observation $0.8 $0.6 $0.7 $0.7 $0.8 Notes: Numbers may not sum exactly due to rounding. (1) Includes capacity for DTH satellite TV and some mobility service platforms. (2) Includes VSAT, mobility, and in-flight connectivity. 12 Formerly Tauri Group Space and Technology Satellite Services Findings: Consumer Services Highlights Satellite radio and consumer satellite broadband posted 10% and 3% growth respectively in the consumer services segment, while more mature satellite TV stayed flat Satellite TV Services Satellite Satellite Radio Broadband ($2.0B) • Satellite TV services (DBS/DTH) stayed flat and Radio ($5.0B) • Satellite radio (DARS) revenues accounted for 77% of all satellite services revenues; grew by 10% in 2016 93% of consumer revenues • Satellite radio subscribers grew 6% • Up to 220 million satellite pay-TV subscribers in 2016, to 31.3 million worldwide (plus at least half as many free-to-air satellite TV households), driven by demand in • Primarily U.S. customer base emerging markets $104.7B • 41% of global revenues attributed to U.S. 2016 Consumer Satellite Broadband Services • U.S. growth driven by premium service revenues Revenue • Revenue grew 3% • Production of UHD content drives increasing (but still • About 3% more subscribers, relatively low) # of channels Satellite TV approaching 1.9 million $97.7B • Potential slowdown of demand growth for satellite • Faster growth anticipated with more capacity: compression technologies continue to capacity available on newly launched improve, more consumers opt for IP-based video satellites over the U.S. services • Most subscribers in the U.S. Non- U.S. subscriber growth rate high, Prepared by: though accelerating from lower base 13 Formerly Tauri Group Space and Technology Satellite Services Findings • Mobile satellite services grew 5% » Includes some revenue from Ku and Ka-band FSS capacity provided by MSS operators to provide maritime, airborne, and some other mobility services • Fixed satellite services decreased by 3% » Transponder agreement revenues down 10%, compared to 1% growth in 2015 » Revenues for managed