WASHINGTON: Someone had to lose in the battle for survival in the commercial spy satellite business. Yesterday’s announcement that DigitalGlobe and GeoEye would “combine” left it clear that DigitalGlobe had won.

After all the new company will be called DigitalGlobe and the CEO and chairman will be from that company, with GeoEye’s CEO playing an “advisory role.” And the board of directors will boast six members from the current DigitalGlobe board and only four from the board of GeoEye.

GeoEye stockholders will make out all right, as the $900 million transaction delivers them a premium of 34 percent.

We checked around the space and geospatial communities to get some idea as to just how successful this combination might be and what it might mean to the most important people, those who use the product these companies produce.

Keith Masback, president of the US Geospatial Intelligence Foundation, said “the combined resources of GeoEye and Digital Globe should make for a powerful company which will be able to uniquely compete internationally.” This is an interesting point, as the international market is likely to be where DigitalGlobe will actually make its profit, given the coming sharp decline in NGA’s commercial imagery budget.

When the two companies merge and create an integrated tasking operation for their satellite constellation, “that will be a big-time differentiator,” Masback added. “Combined analytic efforts will give them a further advantage over their international competitors. The US DoD and IC should benefit significantly as well.” If the merger “is properly managed” he thinks the combination offers “remarkable potential.”

Loren Thompson, who tends to approach these matters from a business point of view, said the merger, “reflects the waning fortunes of companies in the commercial imagery business. As with other business strategies developed for the federal marketplace, the commercial imagery companies failed to take into account the capriciousness and undependability of the government customer.” (Thompson, a defense consultant, is also a member of the Breaking Defense Board of Contributors.)

In a recent interview with a senior satellite industry leader, this point was made much more bluntly: “They forgot the government is a f**cking fickle customer.”

Josh Hartman, the former head of Pentagon space acquisition and now a consultant, said simply this merger was “the only way they will survive.” But the new DigitalGlobe must change its business model “from imagery to GEOINT, which is data-centric and not limited to the U.S. government. The next step is to shift their products to more than just pictures and realize that their future competition will come from data-centric companies like Google and Facebook.”

While the National Geospatial Intelligence Agency (NGA) will probably continue to grouse about the deep cuts in their commercial imagery budget mandated by Jim Clapper, director of National Intelligence, the larger issue the IC faces is how does it change how it works with DigitalGlobe and future providers.

(As a reminder of just why the intelligence community and our allies like commercial imagery so much, we picked a DigitalGlobe image of Damascus to illustrate this story.)