The Price of a Pixel
Craig Bachmann & Natasha LÉger are partners in ITF Advisors, LLC, an independent consulting firm with a focus on next-generation strategy and on translating the increasingly complex new media business environment's impact on business models, markets and users.
If a picture is worth a thousand words, what is the value of a pixel? Pixels are sold in many forms: photographs, movies, video games. The entertainment industry has made monetizing pixels an art form. As pixels are all digital media, comparing the film and entertainment business to the I/RS business may be worthwhile.
The costs of production of a single feature film and of high-resolution imagery average approximately $1 million a day. However, Hollywood is a $25 billion industry and video gaming is another $25 billion, whereas the commercial earth observation and land imaging business, including value-added services, is estimated at $3 billion. Is entertainment really more "valuable" than knowledge of the planet that can improve and save lives?
To answer that question, consider another: What is the value of a pixel that has latitude, longitude, elevation, and various spectra associated with it? Clearly, the price one would pay for such pixels depends on the value of the image in addressing a business, governmental, NGO, or environmental need. As a backdrop, the value is free through Google Earth; to recover from a natural disaster, the value may be thousands of dollars (assuming that first responders use Google Earth and Maps and other virtually free tools); to build a new pipeline or commercial development project, hundreds of thousands of dollars; to find a new customer, millions of dollars; to address climate change, pandemics, natural resource scarcity and war mitigation, the image is priceless!
In a world where imagery is widely and freely available, it is rapidly turning into a commodity with a plunging price point. There is value in data quality—the accuracy, reliability, and timeliness of the image. But there is exponential value in tying imagery to specific business and operational goals. The customer need determines the value of any product or service. The context of the interest in imagery brings along with it a budget, and a need to use location intelligence.
How are these budgets developed?
How is the value of the pixel established?
Will the value of the intelligence associated with the pixel cause increased perceived value and therefore budgets?
How does intelligence associated with a pixel drive up the value and therefore price of the image?
We have compared imagery to digital media (the entertainment use of pixels), whose moguls spend a lot of time thinking about associating value to their pixels— for example Disney, Sony, and Warner Brothers, all motivated by profit. This value chain takes an expensive set of pixels. For example, Pirates of the Caribbean – Edge of the World cost $300 million (and it is at risk of illegal copying and downloads, like all digital media and imagery). It creates "associated value" through the games, marketing, campaigns, on-line advertising pull through, books, theme parks, and various other value-creating connections. Disney has just turned this third series of Pirates of the Caribbean into a $2.7 billion franchise.
The video entertainment industry also builds "value" by marketing the pixels as "high definition," and soon will market "3D." Obviously, these pixels are more valuable than simply the eye shadow on Johnny Depp—they create an experience that consumers are clearly willing to pay for, including all of the associated hardware upgrades required.
Why is one feature film's franchise the size of an entire imaging industry, when both rely ostensibly on the same result... delivering a picture? Perhaps the answer lies somewhere in the experience the customer seeks and the ability of the producer of the pixels to see across the entire value chain of that original image.
|Figure 1 This graphic illustrates the convergence of pixels taking place by spatial, entertainment and computer graphics industries.|
While it may not seem fair to compare entertainment pixels with spatial pixels, these two worlds are converging, for example, through computational photography, which involves computational imaging techniques that enhance or extend the capabilities of digital photography. Gigapixel technology as an example of computational photography appears to be at the intersection of satellite imagery, GIS, CAD, and entertainment when visualization is critical to meeting an organization's objective. See Figure 1.
A gigapixel image is a digital image composed of one billion pixels, more than 150 times the information captured by a 6-megapixel digital camera. The technology for creating such high-resolution images involves stitching together thousands of high-resolution images, and placing an incredible amount of detail into the mosaic constructed. Eric Hanson, CEO of xRez Studio, a leader in gigapixel technology services, said, "Gigapixel imagery takes photography into a new paradigm that allows for the deep exploration of an image in an unprecedented way." See Figure 2.
Figure 2 This is an xRez Studio diagram taken from the Diving Board of Half Dome, Yosemite Valley, illustrating the relative amount of image detail contained with past and emerging gigapixel formats.
Visual effects professionals are not in the business of scientific accuracy when integrating such imagery as satellite images and digital elevation models. But the technology allows for a user experience that meets very specific business objectives, such as feature film backdrops and video gaming.
Looking towards more social and public safety goals, xRez Studio did a landmark gigapixel project for Yosemite National Park. According to Hanson, this was one of the largest terrestrial photography projects in the world, which mapped 45 gigapixels of photography onto a 1-m DEM for an orthographic elevation view of the park, which was commissioned to help geologists study rockfall. "Yosemite Valley is inherently unstable geologically, and research is ongoing to know the mechanics of geologic faulting and release mechanics. The project has created an unprecedented datum of high resolution images of vertical cliff faces in the park," said Hanson. See Figure 3.
Figure 3 This is an xRex Studio 3D digital terrain model of El Capitan, Yosemite Valley,
aligned to the perspective of a gigapixel image, which demonstrates the merging of the
DEM with the gigapixel photographs.
The highest concentration of high-end computer graphics technology and professionals is probably found in the visual effects and feature film industry, and it seems that 99.9% of those computer graphics professionals don't see how to apply the technology beyond the entertainment field. If digital media are so powerful, why haven't they been applied in other areas? xRez Studios is exploring this gap and sees other applications in natural sciences, cultural heritage, and conservation efforts.
As much as there may be a big oversight in the visual effects industry on the applications of its technology beyond entertainment, there has been similar oversight in the I/RS industry on how to create greater value for its pixels beyond traditional users. Hanson said, "There's some value in creating the images, but when you take the images toward a goal, towards a solution... that's what gives it real value from a technical, social, and artistic perspective."
Today, the I/RS industry relies on intermediaries (software providers, consultants, and value-added resellers) to "add the value" to meet traditional users' needs. Increasingly though, organizations are using the Internet to evaluate spatial imaging without intermediaries. The real question for I/RS providers looking to move beyond the government as the primary customer (cost plus model) to businesses as customers (value-based models) is how to create a commercial market for spatial pixels.
Digital media are about "connecting the dots" to form a value for which the customer will pay more than commodity prices. Ron Elsis, Principal of Geospatial Product Management Solutions, says "a satellite or aerial image alone does not provide a whole product for the majority of users in the commercial market. It is a piece, the organizing principle, of the overall puzzle necessary to provide a commercial customer with an answer to the problem they are trying to solve. The difference between Hollywood and I/RS is that Hollywood acts as the integrator, while the spatial pixel business is a project-based industry that focuses more on providing the component parts of an overall solution."
How does the value chain in I/RS evolve to build a pixel franchise based on knowledge of the planet instead of the appeal of entertainment?
We believe that there will be an ever increasing need for the I/RS industry to innovate and create a better understanding of the "the price of a pixel." This innovation will require:
- Understanding the customers and what drives their perspective of value;
- Developing awareness of imagery substitution options;
- Partnering with third parties to create solutions to address market needs;
- Getting involved in the education and budget process of the customer.