Gogo recently announced two significant milestones related to its Gogo Vision streaming media platform: 2,200 aircraft flying with the kit and 1,000,000 streams delivered on a monthly basis. The company does not break out specific take rate or revenue numbers for Gogo Vision but recent filings do give some indication as to where these numbers are trending.
For take rate we must estimate the number of opportunities passengers had to purchase streaming content, which is an imperfect number but which can be inferred from the connectivity numbers reported. Those suggest approximately 41,000 passenger opportunities per aircraft per quarter or 17,000 per month. That equates to roughly 37,400,000 streaming passenger opportunities per month. The company is delivering 1,000,000 streams in that period, a take rate of 2.67%. This is significantly below the rate for the company’s inflight connectivity product, though there is also more competition involved. In many cases (American Airlines and Delta Air Lines, the two largest install bases for Gogo’s products) there is in-seat embedded IFE content available in addition to the Gogo Vision wireless product, reducing demand for the streaming content. Moreover, much of the recent growth in installs has been on smaller regional jets where shorter flight times also reduce demand for IFE [and connectivity]; long-haul aircraft is where the demand is more acute.
On the revenue side Gogo splits out “Gogo Vision and other service revenue”, which includes its airline partners’ data usage for crew connectivity or data from white-listed websites (e.g. the airline’s homepage) when in flight. In the third quarter of 2015, around the time that the company passed 2,000 installs of Gogo Vision, the revenue in that category increased significantly YoY, nearly doubling. Much of this growth is attributed to the Gogo Vision product but not based on individual stream activity. Rather, Gogo says that the growth is:
[D]riven primarily by a business-to-business arrangement with one of our airline partners for our Gogo Vision offering (which commenced in the second half of 2014), a second Gogo Vision program that occurred in the first quarter of 2015 with another airline partner and revenue from passenger and crew data usage.
In other words, the take rate and the per stream pricing matters less these days because of bulk purchase deals struck with the airlines.
The bulk deals also play into the content side on the Gogo Vision product, including content from American film distributor Magnolia Pictures. Though Magnolia maintains relationships with mainstream distributors to airlines – Terry Steiner, Penny Black Media, Global Eagle’s EIM and Jaguar – the studio’s direct relationship with Gogo allows it to get some of its edgier content in front of passengers’ eyeballs.
Because Gogo Vision is totally opt-in for the passenger, explained Magnolia Pictures head of worldwide sales Christina Rogers in the fall of 2015, “Gogo gets a lot of content that doesn’t get to airlines. Because of the nature of our brand, it’s not necessarily conducive to an airline’s general family audience. We do smaller independent films, foreign language films, documentaries, and a lot of that is tougher [to get] on the mainstream airlines. So Gogo has been a good alternative in that for us.”
Magnolia had roughly 22 films running on Gogo Vision for airlines in the fall, and though it makes a little on each film when a passenger pays to stream, this “aggregates to a decent amount each month”, Rogers told RGN, noting that Gogo’s streaming video product for business aviation clients also serves as a revenue stream, albeit smaller.
“Gogo thankfully has just started to return more interesting dollars to us over last several months…” she said.
Editor’s note: Since the initial release of this report on RGN Premium, the company has reported further details on revenue and passenger opportunity. However, the Gross Passenger Opportunity number remained at ~17,000 per aircraft and the take rate did not change materially. The revenue increased significantly year-over-year based on the wholesale business model; the bulk pricing continues to be a net positive for the company.