Starlink and the Global Cruise Market
Starlink on July 19 tweeted that “Nearly 300 cruise ships are now set to use Starlink to keep their passengers and crews connected with high-speed internet while on rivers and at sea.”
The announcement prompted the Quilty team to look into what percentage of the cruise industry now uses Starlink and what does that mean for other providers, particularly SES O3b mPower?
Background on the Global Cruise Industry – Four Operators Account for ~80%
Here are a few industry basics that provide useful context:
1. There are ~300 ocean-going cruise ships worldwide. The Cruise Line Industry Association (CLIA) listed 270 member ships operating in 2021 and projects total ocean-going vessels will exceed 300 for the first time in 2024. Another source, Market Watch, listed 323 such ships in 2022. The “average” cruise ship is estimated to carry 3,000 passengers though some have capacity for over 6,000 while many others are below 1,000.
2. The Starlink Tweet references nearly “300 cruise ships… on rivers and at sea.” There are hundreds of small passenger vessels that navigate many of the world’s famous rivers, serving as floating hotels for travelers who visit popular sites along the way. Such river cruises may have satellite broadband, but passenger numbers are far fewer than on ocean-going ships and rivers are sometimes in cell range. Consequently, satcom demand for river cruises is far smaller, per ship and in the aggregate, than comparable demand by ocean-going vessels.
3. Four Cruise Operators Account for ~80% of the Market. The “Big 4” are: Carnival, Royal Caribbean, Norwegian Cruise Line and MSC. Combined they have 195 ships, carry 80% of cruise passengers worldwide and account for over 80% of industry revenue.
Satcom Services Play an Essential Role in Keeping Cruise Passengers and Crew Connected
Leading cruise operators rely on a multi-orbit strategy for communications, making significant use of GEO and MEO capacity while rapidly adding Starlink in LEO. Satcom integrators like Speedcast and Anuvu provide GEO capacity, purchasing it wholesale to deliver as a managed service. Cruise lines get connectivity (satellite and terrestrial), terminal equipment, maintenance and support. Starlink and SES O3b also provide a full, end-to-end service to cruise lines by selling direct, bypassing integrators. If Starlink proves successful in delivering high levels of cruise operator satisfaction at low cost, it along with other LEO broadband systems like Kuiper and OneWeb, could reduce GEO business given global LEO coverage.
The Value of the Cruise Industry to Global Satcom’s Commercial Success
The announced capex of new MEO-LEO satellite broadband systems – mPower, Starlink, OneWeb Gen 1 and Gen 2, Amazon Kuiper, Telesat Lightspeed and others – could exceed $40 billion if all are deployed.
It’s common for these companies to highlight the importance of the cruise market to their plans. The obvious rationale: there is no land-based alternative for delivering high-performing broadband to ships at sea. But how much satcom revenue can ~300 cruise ships, many of which carry 1,000 or fewer passengers, produce?
The answer lies in an assessment of how much capacity a cruise ship needs. Estimates vary. Euroconsult forecasts that the average bandwidth consumption per vessel will increase from 40Mbps in 2020 to 340Mbps by 2030. SES offers three mPower service packages for cruise ships with two of them providing MEO bandwidth up to 1.5Gbps.
In the current satcom market, low-cost pricing for space segment – just satellite bandwidth – is ~$100 per megabit per month. Providing a gigabit service at this rate works out to $1.2 million per year per site (1,000 Mbps x 12 months x $100 per megabit). If every cruise ship had 1 gigabit of capacity, satcom revenue for the global cruise industry would be $360 million. This is a best-case scenario that in the real world, given varying size and communications needs of ~300 cruise vessels, will be far smaller.
There is potential for additional revenue from terminals, terrestrial links and other network elements, but these are low margin and may be passed through at cost to the cruise line or even absorbed by the satcom broadband provider.
Our Take: While the cruise industry is a valuable market to companies pursuing new satellite broadband systems, that value will be a small component in LEO capex recovery – not a major contributor in realizing attractive returns on billions of investment.
So Why is Starlink Pursuing the Cruise Market?
In August 2022 (less than a year ago), Royal Caribbean Group said it has become the first cruise liner to adopt SpaceX’s Starlink LEO satellite broadband services. Since then, Starlink has signed most major cruise lines with the exception of MSC Cruises. We believe Starlink's cruise business is largely driven by the company’s interest in building awareness for, and interest in, its residential service.
Starlink has always been clear on its goal of attracting millions of subscribers. In May 2023 the company announced it had reached 1.5 million subscribers two and half years after start of service. Each million subs result in ~$1.3 billion in Starlink revenue. That’s a lot more than they’re ever going to realize from the cruise industry.
SOURCE: https://twitter.com/Starlink/status/1681690744313241600
