Weather Services Become a Big Business
A study in the 1962 "Journal of Applied Meteorology" suggested weather forecasts tailored to the U.S. raisin-drying industry could help maximize gains and minimize losses.
Half a century later, private-sector meteorologists are selling customized weather data to a myriad of enterprises — agriculture, fast food, retail, energy, manufacturing, construction and transportation, golf, sailing and pigeon-racing.
“There is a very close connection between weather and finance, very close in some industries and closer than you might think in others,” says Edward Johnson, director of the National Weather Service’s office of strategic planning and policy, which works with the forecasting industry. “I still get surprised from time to time about the creative ways that the U.S. economy is using our information to be more efficient, to protect people’s lives, to create new companies.”
While the National Weather Service focuses heavily on public safety, private-sector meteorology businesses take the government’s free, raw data — and in some cases generate their own — and tailor it to their commercial customers.
They serve the likes of trucking companies that route vehicles based on winds, fast-food chains that analyze weather data to help gauge the effectiveness of ad campaigns, and steel makers watching for cold snaps that could hamper production.
Where there were tensions in the past, the government and the U.S. meteorology industry collaborate extensively today, along with academia, in what the players call the “weather enterprise.”
The National Weather Service, part of the National Oceanic and Atmospheric Administration, issues data to support the entire economy, and “we have a laser-like focus on public safety,” says Johnson. “But we don’t believe it’s our job to provide packaged information for an individual manufacturer.”
The competitive weather industry has developed since about 1950 in response to a growing demand for specialized, “value-added content,” one initially met by government, noted WeatherBank Inc. President and Chief Executive Steve Root, who is also president of the American Weather and Climate Industry Association. Recent technological advances present significant expansion opportunities.
While only government has the means to build and operate a vast weather infrastructure of satellites and radar, Root says, “There are things that private industry does that it can do faster, quicker, sweeter, better than government.” The North American weather enterprise produces content unrivaled elsewhere in the world, adds Root.
Customized, complex data sets, for example, can be used to predict the demand for winter coats and timber as well as extreme dangers to specific commercial property.
Global forecasting player AccuWeather Inc.’s WeatherData Services unit lists numerous instances in which its early, precise weather warnings helped businesses avert potential disaster.
For instance, one night in May 2007, the company, which can predict risks to specific track points, warned Union Pacific railroadof a tornado danger near Greensburg, Kansas. The railroad stopped two trains and the crews watched as the massive tornado, illuminated by lightning, passed between them, recallsWeatherDataCEO Mike Smith.
Industries use weather data in less obvious ways as well. Root’s consulting company, WeatherBank, works with golf industry analysis firm Pellucid Corp. to help businesses determine the role weather plays in performance, whether in number of rounds played or number of balls sold.
Pellucid, with clients including Billy Casper Golf and Titleist, considers itself a golf market-maker for WeatherBank, says company President James Koppenhaver.
The companies’ combined expertise, including custom data that defines golf-playable days, allows Pellucid to tell course managers the extent to which weather influenced business. If a facility’s performance slides, managers need to know whether marketing or operations need to be changed.
Often, says Koppenhaver, the weather data will show that a client's dip in business performance wasn't as significant as the drop in golf-playable days, so Pellucid can say, "'You actually outperformed what the weather gave you to work with last month.' ”
The data from WeatherBank, which includes years of weather station data, is more sophisticated and reliable than the observations of a $7-an-hour employee, he says.
The industry ranges from one- or two-man shops to major services like AccuWeather and the Weather Channel Companies, the latter owned by a consortium that includes NBCUniversal, parent company of CNBC.com.
Getting a precise handle on the industry's size and revenue can be difficult, given that so many players are privately held and the space is highly competitive.
Tim Spangler, director of the COMET atmospheric sciences training program, estimates the broad U.S. weather and climate industry at more than $5 billion, including some 250 commercial weather companies that generate roughly $2 billion.
“This whole commercial space has been growing faster than you can imagine,” says WeatherBank’s Root, referring to technological advances rather than new forecasting companies or rocketing revenue.
Established forecasting services probably grow internally at less than 10 percent a year, he said. Wireless technology and a host of sophisticated graphic and data capabilities, on the other hand, represent significant opportunity for expansion into new arenas, he says.
“The phenomenal growth rate,” Root says, “is the opportunity that’s ahead of us.”