Last week, GeoEye announced
it had "finalized a Service Level Agreement (SLA) modification to the
company's existing NextView contract with the National
Geospatial-Intelligence Agency (NGA). The value of the SLA is $12.5
million per month for a period of one year." Directions Magazine
contacted GeoEye to get further clarification on why the modification
to the contract was necessary, the changes to its business model, its
impact to its existing distributors and partners.
Directions Magazine (DM): In the press release, Erol Morey, GeoEye's
Next View program director,"This service-oriented imagery acquisition
model optimizes imagery collection opportunities for our constellation
of satellites." Can you have someone explain what is meant by a
"service-oriented imagery acquisition model"?
GeoEye: The service-oriented imagery acquisition model is
considerably different than the conventional business model. In the
conventional model, a customer (like the NGA) identifies a particular
area on the surface of the Earth and asks GeoEye to image it, given
certain parameters: No more than 20 percent of the delivered imagery
can contain clouds, the imagery must be accurate to within 15-meters of
its true location on the earth's surface, etc. GeoEye would image this
area, perhaps many, many times until the order parameters are
satisfied. GeoEye delivers the imagery to the customer along with an
invoice for payment. The invoice value is simply the square kilometer
of area times the negotiated price per square kilometer.
In the service-oriented approach, the customer (like the NGA) asks that
GeoEye image large areas of the Earth's surface. GeoEye commits a
certain portion of our constellation's capacity to address this
requirement and commits to continued imaging operations over this area
maintaining image currency (freshness) to a specified level. Example:
GeoEye will conduct imaging operations over a particular area such that
all imagery over the area will be no older than eight months. The
invoice at the end of the month is based upon our performance.
DM: The press release states, "This agreement gives NGA a
predictable supply of the world's highest resolution commercial
satellite imagery." Was there a change to the contract that
necessitated a modification such that there was not a predictable
supply of imagery for the NGA? I assumed the contract had already
stipulated a certain supply stream of imagery to the NGA. Please
NGA committed to purchasing a quantity of imagery from GeoEye over an
18-month period of performance after GeoEye-1 achieved full operational
capability. The month-to-month revenue that GeoEye would have received
under the previous contract structure is entirely dependent upon NGA
placing individual image orders. If NGA elected not to place any orders
in a given month, we would not receive any revenue from NGA for that
month. GeoEye prefers a balanced best-value approach, like the service
model, where we continually deliver value to our customers.
DM: The press release states, "This contract, together with GeoEye's
recent modifications to its business model for international commercial
affiliates, ..." What are the modifications to its business model and
how will it affect its partners, affiliates and resellers?
critical modification to our international business model is that fact
that GeoEye retains the right to directly sell all imagery acquired by
the GeoEye-1 satellite. This GeoEye-1 model is considerably different
from the IKONOS business model where individual Regional Affiliates
retained all rights to IKONOS data downloaded to their ground station.