Better technology gives forecasts more value, making meteorology a fiercely competitive business.
FORTUNE — The weather this winter has been particularly frightful — crippling cities that aren’t accustomed to snow and ice, and making commuters in colder climes slosh to work, week after week, in duck boots. Treated to a polar vortex, or two, and 15 winter storms — Atlas to Orion, by The Weather Channel’s mythological name count (Pax is currently heading for the Southeast) — Americans have been transfixed by the elements.
If there were a season for The Weather Channel to shine, this should be it. And yet, while ratings are up (last winter was downright balmy), the 24-hour weather network has spent this winter weathering a storm of its own.
In January, in the aftermath of a bitter contract dispute, the nation’s 20 million DirecTV (
) subscribers woke up without the Weather Channel. (And The Weather Channel woke up without one-fifth of its potential audience.) In its place was WeatherNation, a bare bones, Colorado-based outfit that offers forecasts on loop and little more.
The Weather Channel’s parent company — which boldly renamed itself The Weather Company (dropping Channel) in October 2012, and which is owned by NBC Universal and private equity firms The Blackstone Group and Bain Capital — has been campaigning ever since to win back this lost flock. Whipping up the sort of alarm one would expect with a Category 4 Hurricane, The Weather Channel called its new competitor a “cheap upstart” and has tried mightily to make the case that there’s more at stake for DirecTV subscribers than access to Jim Cantore. “This is a dangerous gamble over one penny a month that puts DirecTV customers at risk,” Weather Company CEO and Chairman David Kenny said last month. “This reckless move by DirecTV will have an impact on our role as part of the national safety and preparedness fabric of our country.”
At least as likely, it will have an impact on The Weather Channel’s bottom line. Losing DirecTV’s 20 million subscribers is bad for the Weather Company, which, according to a 2013 Moody’s note, makes more than half its revenue from advertising. But acceding to DirecTV’s wishes and a rate cut would be far worse, because other cable providers would cut rates, too. It doesn’t help that this dispute comes on the heels of significant investment by The Weather Channel in science and technology, as well as in meteorologist personalities. (Good morning Sam Champion!) Nor does news that other weather companies — like WeatherNation and AccuWeather, which announced in January it would launch its own national cable channel later this year — are tossing their meteorological services into the 24/7 TV weather ring.
The Weather Company saw this storm brewing months ago; it began lobbying legislators in September and had at the ready a slick website — keeptheweatherchannel.com — with explicit instructions for lost fans who wanted to fight back. A 1-866-WTHR-CHL hotline was there to field complaints and reroute them to DirecTV dealers or Congressional representatives (this option is no longer available), as was a long list of numbers for alternative cable providers. Through Monday afternoon, the site had tallied 210 million social impressions and 6.6 million visitors, 284,000 of whom had pledged to switch from DirecTV.
That’s not nearly enough to thaw this deep freeze, but The Weather Channel’s loud and aggressive campaign is a sure sign the weather wars are heating up (another sign: an AccuWeather billboard, promoting its new cable channel — “All Weather. All the time” — provocatively raised in Atlanta, the Weather Channel’s home turf and the site of last week’s American Meteorological Society conference).
And cable television is just the start. Thanks to more sophisticated technology and data, and the more accurate forecasts they’re producing, weather data is more in demand, and being applied more broadly, than ever before. From digital ad-targeting to assessing lending risk to optimizing inventory and logistics, businesses now count on increasingly precise and customized forecasts to make strategic decisions. So does the public, which has easy access to localized, real-time weather data for personal planning needs.
“The fact that you can trust weather forecasts means they have much more value than they did in the past,” says Dr. Keith Seitter, executive director of the American Meteorological Society. “A four-day forecast is as good as the three-day forecast 10 years ago.”
The weather business has ballooned accordingly. A 2013 study by COMET, a program at the University Corporation of Atmospheric Research, an academic consortium, estimated the total value of the weather industry (commercial and government sectors included) to be $6 billion. And profit margins are growing as meteorology becomes an increasingly automated business.
The number of commercial weather companies, which include market leaders like The Weather Company and AccuWeather, as well as many smaller, locally operated firms, grew to 350 in 2013 according to Wharton Business School data. (Revenues for the industry jumped 50% between 2011 and 2013.) Big data companies, old and new, are also joining in, from IBM (
) to weather insurance startup Climate Corporation, a firm founded seven years ago by ex-Googlers that was acquired by Monsanto last year.
But no company has been as bold in its bid to own the weather as The Weather Company. Aside from that expansive new name, in recent years the company acquired two competitors — Weather Underground and Weather Central — and presumed the duty of naming winter storms. Aside from the Weather Channel, the company operates weather.com, the leading digital weather destination in the U.S., and WSI, a commercial forecasting group that provides customized weather data to scores of major corporations, particularly in the aviation, energy, and media industries. According to an October 2012 report from the market research firm IBIS World, the Weather Company has a 51.2% market share of the weather forecasting services industry. AccuWeather, the next biggest player, has 14.2%. Kevin Culbert, the report’s author, expects consolidation in the industry to continue.
Despite the noisy month, television may in fact be the least significant front in the weather wars. The Weather Company and AccuWeather, which respectively claim to have the most “precise” and most “accurate” forecasts, are looking particularly to gain ground digitally. This means expanding their audience, both on their own digital platforms and through integration of their data into the “Internet of Things.” Whereas AccuWeather’s app is preloaded on Samsung devices, smart TVs, and Qualcomm’s Toq smartwatch, The Weather Company’s forecast data is used in Nest smart thermostats and the dashboards of some Toyota TM cars. The majority of weather apps, and some non-weather ones like Snapchat, also use The Weather Channel’s API or application programming interface, which allows those entities to tap into The Weather Channel’s data. (In a sign of the company’s digital prioritization, Kenny, a former CEO of Digitas and president of Akamai , became the CEO and Chairman of The Weather Company in 2012.)
There’s also the rest of the world out there, something both companies are keeping in mind as their apps become increasingly popular in cities around the globe.
As The Weather Company rolls into its second month out in the cold at DirecTV, that’s a silver lining.