Impact of SpaceX rideshare on small sat launchers market

[edzieba]

So do they have a problem? Planet and Capella have both launched on SpaceX Transporter missions, and Blacksky has launched as a Starlink rideshare. What would be keeping these rapidly-growing smallsat constellation operators from launching most if not all of their payloads on larger rideshares?

The same things that are keeping them flying on smallsat launchers today despite having been also flying rideshares for years (e.g. Planet have been flying rideshares since their inception a decade ago): getting their payloads to the exact orbit they want, on the schedule they want.

[su27k]

https://twitter.com/jeff_foust/status/1623123016115691520

Lots of discussion on the panel about affordability and launch costs. Arianespace's Marino Fragnito suggests an unnamed company (which sounds a lot like SpaceX) is setting smallsat launch costs so low on rideshare missions other companies can't make money.


Rocket Lab's Adam Spice agrees about the effect SpaceX Transporter missions are having on the market; will force a "survival of the fittest" among small launch companies.


Spice: we're at the beginning of the bloodletting of aspirational launch companies. Won't see much M&A activity; the weak will just die.

"Let the bloodletting begin"...

Also it's pretty funny that internet pedants claim we need competitors to SpaceX because their launch price is too high, meanwhile the other launch providers are saying they couldn't compete because SpaceX's price is too low...

[M.E.T.]

https://twitter.com/jeff_foust/status/1623123016115691520

Lots of discussion on the panel about affordability and launch costs. Arianespace's Marino Fragnito suggests an unnamed company (which sounds a lot like SpaceX) is setting smallsat launch costs so low on rideshare missions other companies can't make money.


Rocket Lab's Adam Spice agrees about the effect SpaceX Transporter missions are having on the market; will force a "survival of the fittest" among small launch companies.


Spice: we're at the beginning of the bloodletting of aspirational launch companies. Won't see much M&A activity; the weak will just die.

"Let the bloodletting begin"...

Also it's pretty funny that internet pedants claim we need competitors to SpaceX because their launch price is too high, meanwhile the other launch providers are saying they couldn't compete because SpaceX's price is too low...

The surprising thing is that anyone is surprised at this.

Prediction:

Virgin Orbit and Astra are not long for this world.

[su27k]

Jeff Foust's article that contains most of the quotes: Small launch industry warns of “bloodletting”

Executives with several launch companies said during a panel at the SmallSat Symposium in Mountain View, California, Feb. 7 that they are seeing strong demand for launch services but are struggling to make money as competition, particularly from SpaceX, drives down prices.

“I’ve been in the space business now for almost 30 years,” said Marino Fragnito, senior vice president and head of the Vega business unit at Arianespace. “I have never seen so much business. I have never seen so much demand for launches.”

However, he said it was currently difficult for his company and others to make money launching small satellites. “If we talk about 50 kilograms, 100 kilograms, this kind of satellite size, this is the size of the Transporter missions,” he said, referring to the series of SpaceX Falcon 9 dedicated rideshare launches. “The reference price is the Transporter price. With that price, nobody will make money.”

[Ben Baley]

That source has 55 missions launching on 13 Electrons, so that's 42 payloads not paying RL prices either.

Also, the number of payloads on Transporter seems to be very volatile. I wouldn't be surprised that not all of those broke even, and that the number of additional Transporter missions will be limited to the few destinations with enough customers.

Also, non-Chinese small rocket launches increased 40% this year so far, with a few more scheduled this year. That's the fourth year of double digit growth in a row, with 1-3 launches being the norm before that time. In that same timeframe, conventional non-Chinese larger rockets continued their downward trend, bottoming out last year and the year before that at 50.7% of what it was before SpaceX hit their stride. There'll be some recovery this year with the Russian military being very active, and ULA recovering to early SpaceX-hitting-their-stride numbers, but it's still pretty bleak picture for the others.

All in all, while I agree that small launchers will always be a limited market, I don't think they are the ones getting their lunch eaten the most by SpaceX.

 I don't think the volatility in the numbers of payloads on a rideshare is so much about lack of demand as variability in the size of the payloads, SpaceX tops off their rideshares with starlinks and there isn't way more on the flights with lower numbers of payloads, also because the flights are being topped off they're not losing when they're undersubscribed.

[gongora]

SpaceX is not routinely topping off the Transporter flights with Starlinks.

[ZachS09]

SpaceX is not routinely topping off the Transporter flights with Starlinks.

Only the first two Transporters included a small number of Starlinks (ten and three, respectively).

[john smith 19]

The surprising thing is that anyone is surprised at this.

Prediction:

Virgin Orbit and Astra are not long for this world.

Quite correct. Also from the article.

“The reference price is the Transporter price. With that price, nobody will make money.”

That is exactly the point. To kill the competition.

Spacex is a large aerospace corporation responding to competition exaclty like a large aerospace corporation would.

Top tip in business. 

SOP is for companies to do what they can get away with. The history of large and small companies is full of such behavior. It takes a)A very ethical management (with leadership from the very top) to create a culture that says "This behavior is unacceptable," for whatever form  of behavior you're talking about. b) That essage to be very clearly communicated to the whole workforce.

Clearly SX has no concerns in this regards. If their pricing is low enough they choke off any nascient competior and still make a few bucks in the process that's all good. I think they are aware of exactly this effect and I thingk that's exactly why the figure is what it is.

Anyone who doesn't get this has a rather childlike view of business. Read more Heinlein

[john smith 19]

Also it's pretty funny that internet pedants claim we need competitors to SpaceX because their launch price is too high, meanwhile the other launch providers are saying they couldn't compete because SpaceX's price is too low...

I can tell Marketing is not really your strongest subect. 

The 3 most important principles of Marketing (the subject, not the act of doing it for a product or service) are segmentation, segmenation and lastly (but by no means least) segmentation.

So what people are talking about is that SX is using proprietary technolgy (and it is proprietary. They won't sell it to you or transfer the technology to anyone else) to potentially (because no one knows their real costs) offer rideshares at artificially low prices to drive their competitors into bankruptcy.

Using the money from their main business "segment" of the market (multi-tonne launch) to kill off competition in a secondary market. IOW a pre-emptive strike.

That's called "predatory pricing" in the anti-trust jargon.  Of course with a single, tighly intergrated company its very difficult to prove unless a whistle blower hands a copy of key documents to the relevant regulator. The problem is does anyone regulate space launch prices in the US?

So yes real, honest competion does lower prices.

And no one knows if those ride-share prices are fair (because first stage recovery really is that efficient) or if they are set at that level for SX to hoover up a bit more cash and kill off potential rivals.

The big picture is always instructive.

When SX started it cost 10s of $m to launch a multi-tonne satellite to GEO

And in 2023 it still  costs 10s of $m to launch a multi-tonne satellite to GEO

IOW the major price reduction that SX has brought to the market is essentially zero.   

Because  (another little lesson they teach on Marketing courses) is that Price <> Cost.

BTW. What I have said could have applied to any player in the market who got a bit of leg-up over their competition. I admire SX engineering skills (especially their mfg and operations). Their achievements have changed the planning field of what peoplt think is "possible" forever.

But they are a business and and they do business like a business. Anyone who has any sort of rose-tinted misty eyed vision of them when it comes to their competition here on earth is simply kidding themselves. 

[DanClemmensen]

That's called "predatory pricing" in the anti-trust jargon. 

So yes real, honest competion does lower prices.

And no one knows if those ride-share prices are fair (because first stage recovery really is that efficient) or if they are set at that level for SX to hoover up a bit more cash and kill off potential rivals.

The big picture is always instructive.

When SX started it cost 10s of $m to launch a multi-tonne satellite to GEO

And in 2023 it still  costs 10s of $m to launch a multi-tonne satellite to GEO

IOW the major price reduction that SX has brought to the market is essentially zero.   

Because  (another little lesson they teach on Marketing courses) is that Price <> Cost.

But they are a business and and they do business like a business. Anyone who has any sort of rose-tinted misty eyed vision of them when it comes to their competition here on earth is simply kidding themselves. 

SpaceX is a for-profit company. Unless they are selling a service at a loss, it is not predatory pricing. It is in fact exactly how a free market is supposed to work.  In a competitive market (e.g., small sat) the optimum price point  for the most efficient competitor is just below the price charged by the next-most efficient competitor.  In a market with elastic demand and a very few sellers (monopoly or near-monopoly) or with an overwhelmingly dominant seller (e.g., GEO launches) the dominant seller sets the price that maximizes total profit based on the price/demand curve.

[ringsider]

"Let the bloodletting begin"...

Also it's pretty funny that internet pedants claim we need competitors to SpaceX because their launch price is too high, meanwhile the other launch providers are saying they couldn't compete because SpaceX's price is too low...

The surprising thing is that anyone is surprised at this.

Prediction:

Virgin Orbit and Astra are not long for this world.

While both probably true, these analyses don't offer any insight into what is really going on.

It's a much more strategic, slow motion game that is playing out.

[gongora]

As one of the quotes in the article said, SpaceX is taking a lot of the volume out of the smallsat launch market.  SpaceX isn't fulfilling all the demand or providing the most responsive service (it seems you still have to book quite a while ahead on these flights), but the number of sats they take out of the launch market makes it more difficult for the other launch providers.

[john smith 19]

SpaceX is a for-profit company. Unless they are selling a service at a loss, it is not predatory pricing.

That sounds like a common-sense explation of the term. Let's see what investopedia has to
say

Predatory pricing is the illegal business practice of setting prices for a product unrealistically low in order to eliminate the competition.

So no they don't have to sell at a loss, just an unrealistically low price, and if you read my post carefully you will see I can't be sure they are. In fact no one can be sure if they are or are not because no one outside of SX has the cost data. I'm sure SX will continue to take great care to keep it that way.

It is in fact exactly how a free market is supposed to work.  In a competitive market (e.g., small sat) the optimum price point  for the most efficient competitor is just below the price charged by the next-most efficient competitor.  In a market with elastic demand and a very few sellers (monopoly or near-monopoly) or with an overwhelmingly dominant seller (e.g., GEO launches) the dominant seller sets the price that maximizes total profit based on the price/demand curve.

You do realise that the space launch market is nothing like that, right? Demand is not elastic and customers have to go launch providers who can service their specific segment. Under certain circumstances they may be barred from using the actual cheapest supplier EG if they are Russian.  A satellite is not a hog you can cut up into smaller pieces to make cooking it easier.

So demand isn't  elastic (look at how the USG has swallowed the huge increase in NSS prices over the years, because there was no alternative in that segment.

Neither is the fact that even if you provide the cheapest launch service in your segment (which means in a real free market you get customers from everywhere using your product) you do not necessarily dominate the market because a) Nations don't want to loose that much money to another country and b)Some are very unwilling (possibly based on actual experience) that they will be forbidden from launch some payloads (which is why Europe has Ariane in the first place, because of a US companies desire to maintain a US monopoly).

 You cannot buy a vehicle All you can buy is a ticket-to-ride. With (if you're lucky) a 1 iin 50 failure rate. 

And lastly the sole manufacturer/sole operator business model is unlike every other trasnportation system on the planet.
Mack build trucks, they don't run a trucking company.
Boeing does not run an airline
GE builds locomotives but does not run a railroad.
And similar product suppliers in other countries don't either. Curious that.

Some people think this is just "The way it is," because space launch is special.  I disagree. A space launch system may never be like your car, but it should be a damm sight more like getting a container shipped around the world than launching an ICBM, which frankly it basically still is. 

[john smith 19]

While both probably true, these analyses don't offer any insight into what is really going on.

It's a much more strategic, slow motion game that is playing out.

Agreed.

It's goal is not the ending of a few current competitors

It's the surpression of all competitors. 

Less snaring a few rabbits, more introducing myxomatosis

[JayWee]

So no they don't have to sell at a loss, just an unrealistically low price, and if you read my post carefully you will see I can't be sure they are. In fact no one can be sure if they are or are not because no one outside of SX has the cost data.

How do you figure out a price is "unrealistically low" ? Price per kg for Falcon 9 is quite a bit lower than Electron.

[RedLineTrain]

So what people are talking about is that SX is using proprietary technolgy (and it is proprietary. They won't sell it to you or transfer the technology to anyone else) to potentially (because no one knows their real costs) offer rideshares at artificially low prices to drive their competitors into bankruptcy.

Why would they really care about the ultimate fate of their small launch competitors?  That doesn't make sense to me.  I doubt they are wasting any synapse firings on it.

[trimeta]

So what people are talking about is that SX is using proprietary technolgy (and it is proprietary. They won't sell it to you or transfer the technology to anyone else) to potentially (because no one knows their real costs) offer rideshares at artificially low prices to drive their competitors into bankruptcy.

Why would they really care about the ultimate fate of their small launch competitors?  That doesn't make sense to me.  I doubt they are wasting any synapse firings on it.

Because successful small launch competitors can become medium or heavy launch competitors. As is demonstrated by Rocket Lab, Firefly, and Relativity attempting exactly this. In fact, the sentiment is that any small-launch company which isn't trying to escape the small-launch market is setting themselves up for failure. But if SpaceX can successfully kill them before they get the chance to diversify and grow, there's no one to compete with SpaceX's actual markets.

[RedLineTrain]

So what people are talking about is that SX is using proprietary technolgy (and it is proprietary. They won't sell it to you or transfer the technology to anyone else) to potentially (because no one knows their real costs) offer rideshares at artificially low prices to drive their competitors into bankruptcy.

Why would they really care about the ultimate fate of their small launch competitors?  That doesn't make sense to me.  I doubt they are wasting any synapse firings on it.

Because successful small launch competitors can become medium or heavy launch competitors. As is demonstrated by Rocket Lab, Firefly, and Relativity attempting exactly this. In fact, the sentiment is that any small-launch company which isn't trying to escape the small-launch market is setting themselves up for failure. But if SpaceX can successfully kill them before they get the chance to diversify and grow, there's no one to compete with SpaceX's actual markets.

It seems much more likely that SpaceX is just focused on itself and whether it can offer a compelling service.  That task is hard enough.

Partial reusability naturally creates an extinction-level event for small launchers as a side effect.  Full reusability naturally creates an extinction-level event for at least medium and heavy launchers as a side effect.

Transporter has a ridiculously low marginal cost.

[trimeta]

So what people are talking about is that SX is using proprietary technolgy (and it is proprietary. They won't sell it to you or transfer the technology to anyone else) to potentially (because no one knows their real costs) offer rideshares at artificially low prices to drive their competitors into bankruptcy.

Why would they really care about the ultimate fate of their small launch competitors?  That doesn't make sense to me.  I doubt they are wasting any synapse firings on it.

Because successful small launch competitors can become medium or heavy launch competitors. As is demonstrated by Rocket Lab, Firefly, and Relativity attempting exactly this. In fact, the sentiment is that any small-launch company which isn't trying to escape the small-launch market is setting themselves up for failure. But if SpaceX can successfully kill them before they get the chance to diversify and grow, there's no one to compete with SpaceX's actual markets.

It seems much more likely that SpaceX is just focused on itself and whether it can offer a compelling service.  That task is hard enough.

Partial reusability naturally creates an extinction-level event for small launchers as a side effect.  Full reusability naturally creates an extinction-level event for at least medium and heavy launchers as a side effect.

Transporter has a ridiculously low marginal cost.

The question is is ultimately, why did SpaceX begin to offer its Transporter missions? Was it just for the revenue? I'm sure that with the low marginal costs, SpaceX is turning a profit even with their competition-killing prices. But considering the amount of money SpaceX needs for their Starship plans, it's hard to believe that four extremely low-margin flights a year are really moving the needle.

And while Transporter is likely profitable on paper, it's probably also a huge hassle to run. Herding a bunch of small satellites, many of which are built by students or very early companies which aren't great at schedule adherence or other logistics, has got to be a headache. Sure, SpaceX can impose a policy of "if you're not ready, we're flying without you," but that ultimately means carrying fewer payloads and lowering their profit margins even further.

So looking at the motivations, the options are basically "there's a small amount of money on the table, and we might as well take it" and "there's a small amount of money on the table, which would nonetheless be enough to allow competition against us to survive, so we'd better take it." I don't think it's unreasonable to consider that the second motivation did in fact have some influence on decision-making.

PS: It's interesting to note that prices for a full Falcon 9 launch aren't set at "competition-killing" levels: they seem to be more like "low enough to make us the obvious choice, but leave us a healthy profit." But for Transporter, they're not pricing the equivalent of $5 million for an Electron's worth of payload; they're charging $1.2 million. That's "we're not going to allow Rocket Lab to lower their prices to compete, we're just going to kill them" pricing.

[DanClemmensen]

And while Transporter is likely profitable on paper, it's probably also a huge hassle to run. Herding a bunch of small satellites, many of which are built by students or very early companies which aren't great at schedule adherence or other logistics, has got to be a headache. Sure, SpaceX can impose a policy of "if you're not ready, we're flying without you," but that ultimately means carrying fewer payloads and lowering their profit margins even further.

So looking at the motivations, the options are basically "there's a small amount of money on the table, and we might as well take it" and "there's a small amount of money on the table, which would nonetheless be enough to allow competition against us to survive, so we'd better take it." I don't think it's unreasonable to consider that the second motivation did in fact have some influence on decision-making.

PS: It's interesting to note that prices for a full Falcon 9 launch aren't set at "competition-killing" levels: they seem to be more like "low enough to make us the obvious choice, but leave us a healthy profit." But for Transporter, they're not pricing the equivalent of $5 million for an Electron's worth of payload; they're charging $1.2 million. That's "we're not going to allow Rocket Lab to lower their prices to compete, we're just going to kill them" pricing.

Do most of the rideshares contract directly with SpaceX, or with aggregators? If with aggregators, then the small LVs are competing with the aggregators and not with SpaceX.