Is competition speeding things up?

[Space Ghost 1962]

Instead, the near monopoly on launch services held by Boeing and Lockheed, as they bought everyone up, held up prices.

That was because they had to maintain the illusion of "expensive sats" with "cheap but necessary launch". "It would be a shame for that nice, shiney sat to not make it to orbit, with that neglected thruster."

"We can oversight those cheap LV's, but only if you buy our high cost sats".

So, when Elon entered the scene, the launch market was ULA with high prices, and Russian competition, hindered by ITAR and reluctance of the US government to fly Russian, and bad marketing by the Russians, and the occasional political snit.

Actually, the Russian's saw themselves as little different from the prior mentioned group, so created a market contradiction that had the effect of scrwing them and building up launch cost "inflation".

The existence of the Russians, however, killed off any new small US launcher, since unit costs were important enough to NASA that they would fly on cheaper Russian launchers for small programs.

Boeing with SeaLaunch tried to exploit this as well. Again, Russian aggrivations made this difficult - they really didn't want to understand how to make it work to suit, they just wanted it to either work their way or not at all.

And then Orbital's Minuteman flight program killed Athena dead, leaving this country with no small domestic commercial launcher, which probably would be useful today.

Yes.

Elon was the first US player with capital to understand the impact of lower launch costs on enlarging the market, a process that we are now seeing for the first time.  And the impact of SpaceX in grabbing contracts is significant.

Musk needs things to work by different rules (in that way not unlike the Russians), and he is greatly resented for that. His contracts are yet to be significant, yet to cross a certain threshold.

The most significant thing is that he let the industry first attempt to exploit his new rules. Some are balking at that. No problem, he then expands into specific sat mfr/services under a tight agreement that can't be disintermediated. And he still encourages the volume side of the market from anyone wishing to get an advantage over the stolid, turgid, "big" sat firms who are desperately, devoutly wishing for a return to the "old ways".

This is just the beginning. Price competition should have an amazing impact on the launch market over the next few years, barring a series of catastrophes.

You are more optimistic. Suspect we'll need a crash of various new and old sat providers. Ironically, this includes PlanetLabs - some of the investment from the large sat providers are trying to force acquisitions of "dangerous to them" technologies by it, so as to have a single acquisition to "clean up" the industry following Musk demise.

Which is nuts but almost word for word what was told a few weeks back.

I think we'll have chaos for a while.

[oldAtlas_Eguy]

That's the hope for expansion of payloads due to lower launch costs.

In that SpaceX's lead in the lowering of launch costs and the continuing of lowering the $/kg price seemingly occurring by upgrades or other methods happening every 2.5 years, will spur all the other providers to try to keep up. Thus generally lowering launch costs which then expands the payload market from those payloads that were not viable business cases before to become viable.

This is the market expansion cases we are waiting on. The drop from $8,000-10,000/kg to less than $2,000/kg. F9 is now $4,000/kg with the FH at just above $2,000/kg. It is the hope of reusability that F9 drops below $3,000/kg and FH down toward $1,500/kg. Expansion of reusability to include Upper Stages dropping prices further especially for FH toward $1,000/kg could make investing in large scale space projects viable. It would definitely make the large constellation sat networks for comm or sensors more of a business viable endeavor able to compete with any terrestrial systems.

This goal to lower the general $/kg to such a low level that the demand for launch increases. Not only that but the required lift per launch also increases. This demand will increase SpaceX profits by being the go to launch provider maxing out SpaceX's capability at all four of its pads for a launch rate of >48 launches per year or a profit from launches of >$200M per year. This for SpaceX is a twofold goal one to lower the cost for going to Mars and secondly generating the profits to be able to fund going to Mars. If an FH has an internal cost to SpaceX of less than $40M per launch then SpaceX can then send 2-3 FH payloads to Mars in 1 synod with most of the profits going toward the payloads being lofted by the FH toward Mars.

BO has a different goal but effectively it is also fired by a lowering of the general $/kg as well.  The fist generation orbital LV a possible singe engine BE-4 could have a $/kg as low as $3,000/kg. Their second generation vehicle a possible 3X sized LV but still single core could have a $/kg as low as $1,500/kg. All due to the magic of hardly any engine refurbishment or replacement between flights from a cleaner fuel. But this is not BO's basic goal but the goal of a much reduced $/person price to expand the tourist and other (government and corporate) to orbit passengers demand. Starting at around $6-10M per passenger and lowering to less than $4M/passenger with the US reusable on the 2nd gen LV. This puts the orbital price per passenger at about 50X and eventually lowering to just 10X the sub orbital market prices. If only 1/10 the number of passenger per year then takes an orbital tourist flight than that of the number doing a suborbital tourist flight per year then there would be up to 40 tourist flying to orbit each year enough to require 8 flights that carry 5 passengers each every year. Suddenly there are dozens of crew/passenger flights per year going to at least LEO.

With more demand prices drop and with dropping prices more demand. SpaceX's bulk cargo and BO's passenger service could once demand starts increasing will keep it rising as they both persue  their goals. Eventually SpaceX and BO will offer services in each others forte, SpaceX offering tourist flights and BO providing bulk cargo to orbit. Prices will continue to drop and demand continue to rise.

This is the future we hole that SpaceX and BO can create.

[rayleighscatter]

Elon was the first US player with capital to understand the impact of lower launch costs on enlarging the market, a process that we are now seeing for the first time.

Except the market isn't enlarging, it's flat and forecast to contract in the next 10 years.

[Danderman]

Elon was the first US player with capital to understand the impact of lower launch costs on enlarging the market, a process that we are now seeing for the first time.

Except the market isn't enlarging, it's flat and forecast to contract in the next 10 years.

That would be news to the emerging space launch companies preparing to orbit payloads in the 100 kg range, a market that really didn't exist that long ago.

And I guess OneWeb with their hundreds of satellites won't make a difference.

[Lars-J]

Elon was the first US player with capital to understand the impact of lower launch costs on enlarging the market, a process that we are now seeing for the first time.

Except the market isn't enlarging, it's flat and forecast to contract in the next 10 years.

Who made that prediction? I'd love to revisit that one in a decade.

[sanman]

Elon was the first US player with capital to understand the impact of lower launch costs on enlarging the market, a process that we are now seeing for the first time.  And the impact of SpaceX in grabbing contracts is significant.

That's the hope for expansion of payloads due to lower launch costs.

So where have we seen this before?

I immediately think of Henry Ford, recognizing that if he paid his workers a decent enough wage, that they too could become customers who could afford to buy his mass-produced assembly line vehicles.

I think of the drop in cellphone prices, which has brought them within reach of 3rd world consumers by the many  hundreds of millions.

Charles Taylor would probably quibble over whether SpaceX and Blue Origin are market disruptors - because apparently to qualify as a disruptor, you have to not just displace existing business models (the way Uber does), but you have to also be using some novel technology to do so (it's not clear that SpaceX or Blue Origin are really doing that)

So if Musk and Bezos aren't really using any previously unknown technology to pull off their trick, then why the heck couldn't all of this have been done before? Why were the monopolies/duopolies able to stay intact all this time? Why wasn't this Gutenberg-ian competition able to reach this sector before? Just merely because of high upfront capital costs?

[Borklund]

So if Musk and Bezos aren't really using any previously unknown technology to pull off their trick, then why the heck couldn't all of this have been done before? Why were the monopolies/duopolies able to stay intact all this time? Why wasn't this Gutenberg-ian competition able to reach this sector before? Just merely because of high upfront capital costs?

Because progress is not as smooth as you would be led to believe from reading the history books. The right person at the right time with the right resources makes all the difference. Up until a year ago, there was no cheap, quick, temperature-independent Ebola test. It took an internet science fair competition and a 16 year old American girl to come up with one. She did not use any previously unknown technology to pull off her trick. It seems so obvious in hindsight, but apparently it just didn't occur to anyone working professionally in medicine, at least not at the decision making level, that refrigeration and weeks long test times are unnecessary hindrances when it comes to combating viruses spreading rapidly in tropical climates, and to make a product to fix those issues. Perhaps many people at the time of the Ebola outbreak in West Africa thought to themselves "wouldn't it be great if we had a quicker, better way to check for Ebola?". But nothing happened until Olivia Hallisey turned on the news one day.

It would be lazy to just point the finger and blame institutional thinking or greediness of corporations. It's just a fact that some people are more creative in their thinking, and even fewer of those people are poised to strike when opportunity arises.

[sanman]

LOL, fair enough - but all it takes is a "sellout" who feels more motivated to undermine a particular monopoly than to preserve and cash in on it. The monopoly-preservers are usually the ones reaping the revenues from the status quo.

That strategy seems to be increasingly being applied across the board, against a variety of industries and markets.

Yet there are only a handful of "new space" companies trying to bust the status quo. Clearly, making a rocketship isn't as easy as making a model-T or a Wright Bros Kittyhawk airplane in your workshop.

Will we ever see that gap being bridged - ie. the gap between the small Wright Bros workshop and the giant engineering facilities of a Boeing/Lockheed/Rockwell/etc?

When I was a kid, I read Heinlein's "Rocketship Galileo", and marveled at how a group of teenagers under the guidance of an experienced mentor could engineer their own moon rocket. I then read Heinlein's "The Man Who Sold The Moon", which similarly had a tycoon and his business partners making a moon rocket - a bit more plausible as a premise.

I guess Howard Hughes and Stanley Hiller missed the boat. It's only now in the age of the internet billionaire that we can see an Elon Musk or a Jeff Bezos with the resources to come forth to act like Prometheus. It seems that only the personality-driven enterprise can dare to do the Tom Swift type of risky adventurism that any sane/sober corporate board of directors wouldn't touch with a 10-foot pole.

The economy is full of cycles, oscillations and swings - so how much can we attribute the swing away from cautious consensus boardroom-driven decision-making towards the Steve Jobs style of chief/honcho-driven initiatives as the new driver responsible for the latest progress in space innovation?

[sanman]

Competition is certainly expediting the opening up of the market:

https://www.washingtonpost.com/business/economy/why-investors-are-following-musk-bezos-in-betting-on-the-stars/2016/01/28/42bd5066-b962-11e5-b682-4bb4dd403c7d_story.html

[Danderman]

Competition is certainly expediting the opening up of the market:

https://www.washingtonpost.com/business/economy/why-investors-are-following-musk-bezos-in-betting-on-the-stars/2016/01/28/42bd5066-b962-11e5-b682-4bb4dd403c7d_story.html

Actually, that is a story about investment dollars, not launch markets.

[sanman]

Actually, that is a story about investment dollars, not launch markets.

Well, competition is attracting more investment, which is necessary to accelerate and deepen progress.

Another issie is perhaps whether the conditions underpinning this current competition are sustainable

http://fortune.com/2016/01/28/pentagon-congress-spacex-competition/

Will regulatory creep somehow stall competition? Will there be technology patent fights and litigation wars down the road which also snarl up progress?

What happens if there's no ROI from Mars on an investor-relevant timeframe? Could it result in an investor revolt one day?

[sanman]

Competition is shaking up the market, even while speeding it up:


http://www.fool.com/investing/general/2016/01/31/will-spacex-put-russia-out-of-the-space-business.aspx

[Lar]

Competition is shaking up the market, even while speeding it up:


http://www.fool.com/investing/general/2016/01/31/will-spacex-put-russia-out-of-the-space-business.aspx

Take anything  you see at fool with a giant grain of salt... and check what they're pumping lately...  (they are on "the cable companies are in for it" a lot lately... I stopped caring what they were pumping but it's something )

[sanman]

Competition is shaking up the market, even while speeding it up:


http://www.fool.com/investing/general/2016/01/31/will-spacex-put-russia-out-of-the-space-business.aspx

Take anything  you see at fool with a giant grain of salt... and check what they're pumping lately...  (they are on "the cable companies are in for it" a lot lately... I stopped caring what they were pumping but it's something )

Well, I think they have a point about how the longtime Russian leverage with space is now going to take a big dive as the private players price them out of the market.

[guckyfan]

Well, I think they have a point about how the longtime Russian leverage with space is now going to take a big dive as the private players price them out of the market.

At the present ruble exchange rate they can go way down.

[The Amazing Catstronaut]

Yup - Russia can compete purely by the virtue of having a currency that is worth less hard value than the production value of some of their coins.

[Danderman]

Well, I think they have a point about how the longtime Russian leverage with space is now going to take a big dive as the private players price them out of the market.

At the present ruble exchange rate they can go way down.

Russian launch contracts are typically made in US dollars. So, in theory, the Russian firms could drop their prices. I don't think ILS will drop their share, though, so that would limit any lessening the price of Proton, which is the only Russian launch vehicle on the market right now that is launched by Russians.

[yoram]

I don't think ILS will drop their share, though, so that would limit any lessening the price of Proton, which is the only Russian launch vehicle on the market right now that is launched by Russians.

Proton is going to be replaced by Angara over the next years.

Do the Russians really need ILS? Perhaps they could remove the middleman and thus either lower the prices or increase their profit.

[Exastro]

Here's a different way of looking at the launch market:

If demand is inelastic and your market share is fixed by regulations, there's little incentive to reduce costs, especially if you're being paid a fixed percentage of those costs.  You just need to keep your prices low enough to prevent a new competitor from getting traction -- and the history of prospective competitors going belly-up suggests you don't have to work very hard at it.  Starstruck, American Rocket, Space Services Inc., etc. are cases in point.  All those guys had the goal of greatly reducing the cost of launch. 

It used to be said, "If you want to make a small fortune in the space business, start with a large fortune".

But the basic technology got better and made designing and building rockets easier.  And along comes a guy with a pile of his own money and the willingness to risk it on a bet he figured he'd probably lose, but somehow didn't.  Once he's in the mix, his incentive is to drive prices down, because even if the overall launch demand is inelastic, the demand for his company's services isn't: he can grow his business by gaining share in an overall static or even declining market.

Of course the long-term goal is push launch costs down enough to grow the market.  Nobody knows what the demand curve looks like when the cost drops below $1K/kg.  Hopefully we'll learn that in the next few years.

[Exastro]

I immediately think of Henry Ford, recognizing that if he paid his workers a decent enough wage, that they too could become customers who could afford to buy his mass-produced assembly line vehicles.

At the risk of going a bit off-topic, I don't think that old story is true.  Ford did raise his wages, but it doesn't make sense that he'd do it in the hope that his own workers would spend some small fraction of their extra pay buying his product.

If memory serves, the real reason was to reduce training costs due to rapid turnover.  Higher wages kept workers around longer, which increased their productivity enough to be worth the higher wages.

I'd guess that the cost of finding and training workers is a big part of what's keeping their payscale up in the space industry today.  Elon Musk probably doesn't expect his engineers to buy F9s.