Author Topic: Business Case For New Glenn  (Read 26485 times)

Offline noogie

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Re: Business Case For New Glenn
« Reply #120 on: 04/06/2018 12:58 PM »

I do wonder if Elon and Jeff have met in private at any point. That would have been an interesting conversation for sure. But I agree it's better to have competition and SpaceX and Blue Origin are operating on different principles SpaceX is the Hare Blue Origin is the Tortoise (and NASA the wounded slug).

In Christian Davenport's new book The Space Barons, it does mention that they did have dinner in 2004, when Elon heard that Jeff had set up a rocket company on the quiet. They discussed space over that dinner. The book quotes Elon as having said that he tried to give Jeff good advice but that Jeff seemed to ignore any advice that was given.

It would be interesting if we ever get a full recounting of that dinner conversation from either of them and if and how it had any flow on effects to what has transpired since.
« Last Edit: 04/06/2018 01:03 PM by noogie »

Offline Slarty1080

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Re: Business Case For New Glenn
« Reply #121 on: 04/06/2018 01:23 PM »

I do wonder if Elon and Jeff have met in private at any point. That would have been an interesting conversation for sure. But I agree it's better to have competition and SpaceX and Blue Origin are operating on different principles SpaceX is the Hare Blue Origin is the Tortoise (and NASA the wounded slug).

In Christian Davenport's new book The Space Barons, it does mention that they did have dinner in 2004, when Elon heard that Jeff had set up a rocket company on the quiet. They discussed space over that dinner. The book quotes Elon as having said that he tried to give Jeff good advice but that Jeff seemed to ignore any advice that was given.

It would be interesting if we ever get a full recounting of that dinner conversation from either of them and if and how it had any flow on effects to what has transpired since.

Fascinating. I can imagine the same thing working in reverse if Jeff had been first to the table. They both have their own agendas and their own way of doing things. Which goes to show that here is unlikely to be any sort of take over unless it was a life or death option and that was the only way out.
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Offline johnfwhitesell

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Re: Business Case For New Glenn
« Reply #122 on: 05/16/2018 04:35 PM »
I think the business case for New Glenn makes no sense.  However I think this is largely a matter of what you think the business case for new glenn IS and my opinion probably differs from other people here.

What I see New Glenn's business case as is the emerging industry business strategy transplanted into rocketry.  Suppose you are selling widgets and the demand for widgets is growing by 50% a year.  You could certainly make a very healthy profit margin if you keep your price high.  But in the long term the return is much better to try to grow your widget sales.  Instead of taking 10% profit now, you could spend 5 years growing to 7.5 times your current size and make way more selling at 5%.  This means the long term strategy is to sell as many units as you possibly can during an expanding market.  Market share is worth more then profits.  Even if you are selling at a loss you might want to sell at as large a loss as you can afford if the future market is large enough.  This is why so many tech startups can attract capital while burning through cash like there is no tomorrow.  And this applies to SpaceX as well.  They attracted billions of dollars of investment based on the future value of their technology even when they were still eating losses.  Bezos is very keenly aware of this strategy.  It made him rich at Amazon which was worth a quarter of a trillion dollars back in 2015 when it was operating at a loss.  What was the first thing he did when he bought whole foods?  Cut prices.

I think it's very, very likely that Blue is not just selling it's New Glenn launches at a loss but selling them at a massive loss.  I would be extremely surprised if they land a rocket first time ever out of the gate.  But how can they possibly be selling a New Glenn at a profit without reuse?  The engineS alone probably cost them 50 million dollars to make.  Or approach the problem from the other side and look at overhead.  They are going to be spending the ammoritization cost of their initial 2.5 billion (plus several years interest before ammoritization starts) plus a billion in yearly spending.  So that's about 1.35 billion or so.  Divide that 1.35 billion by the number of rockets they will be building a year.  Two?  Four?  Unless they find a customer willing to pay 300 million for a daul launch to LEO in 2022, there is simply no way in hell they aren't selling at a loss.  To get in the black they would need routine relaunches at a faster tempo then SpaceX has right now.  But they are still selling launches.  That to me reeks of the emerging industry mindset, undercut the competition now so you can capture market share for later.

Problem is the "undercut the competition to capture market share" strategy only works if you can actually flood the market.  They missed that chance.  By the time they launch there will be hundreds of launches a year and they will just be a small percentage of that.  They will shave down the profit margins for SpaceX and ULA but both companies are already outspending Blue and they will have another 3 years to grow because Blue even starts competing.  Everyone talks about Bezo's deep pockets but a billion dollars a year is just minimum table stakes at the game he is trying to buy into.  SpaceX almost certainly is spending more then that on R+D and SpaceX is cost effective with it's R+D.  ULA probably isn't spending more then that on R+D but ULA isn't vertically integrated, the development costs are being spread out among several companies (including Blue).  While vertical integration certainly has it's benefits but it still means you need to set your expectations for overhead higher.  Far from flooding the market, I have a hard time seeing them keep pace with the expansion.

So the business case for New Glenn seems to be trying to undercut competition that you can't undercut in order to capture market share that you can't supply.  All of this as a pivot to a long term strategy of future products where you are already behind and are being outspent on R+D by more talented teams.

This is supposed to be leading to the moon. Imagine how many Bigelow modules you could put on the moon for 2.5 billion dollars.  Imagine how much future construction you could fund for a billion dollars a year.

But hey, at least the BE-4 is a pretty nice engine.
« Last Edit: 05/17/2018 02:12 AM by johnfwhitesell »

Offline envy887

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Re: Business Case For New Glenn
« Reply #123 on: 05/16/2018 07:17 PM »
There's no possible way BE-4 cost $50 million. The whole flight set of BE-4s on a New Glenn might cost about $40M, based on the reports that Blue is selling them to ULA for $8M each and probably tacking a 30% profit on that.

You are confusing operating at a profit with payback time. Blue doesn't ever have to payback the dev cost of New Glenn in order to operate at a profit. They just have to charge more than the marginal cost of a launch.

And Blue will nail reuse very quickly. They aren't developing New Shepard for fun, and New Glenn has lots of margins for reuse. Blue isn't SpaceX. They aren't going to crash lots of rockets before succeeding with landing New Glenn. They don't have to make money on every flight or iterate fast or run at very slim margins. If the first New Glenn survives reentry, I pretty sure it will stick the landing perfectly.

Re: Business Case For New Glenn
« Reply #124 on: 05/16/2018 10:44 PM »
There's no possible way BE-4 cost $50 million. The whole flight set of BE-4s on a New Glenn might cost about $40M, based on the reports that Blue is selling them to ULA for $8M each and probably tacking a 30% profit on that.

You are confusing operating at a profit with payback time. Blue doesn't ever have to payback the dev cost of New Glenn in order to operate at a profit. They just have to charge more than the marginal cost of a launch.

And Blue will nail reuse very quickly. They aren't developing New Shepard for fun, and New Glenn has lots of margins for reuse. Blue isn't SpaceX. They aren't going to crash lots of rockets before succeeding with landing New Glenn. They don't have to make money on every flight or iterate fast or run at very slim margins. If the first New Glenn survives reentry, I pretty sure it will stick the landing perfectly.

They'll probably nail the landing very quickly, not reusability. Perfecting operational reuse requires several flights, a lot of data on how the vehicle reacts to flight stresses, and iterative design. No amount of money can buy the time (and number of flights) it takes to do this. And New Glenn reuse is a whole other beast than New Shepard.
« Last Edit: 05/17/2018 02:05 PM by AbuSimbel »
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Offline AncientU

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Re: Business Case For New Glenn
« Reply #125 on: 05/17/2018 12:21 AM »
As good as it would be if they progressed quickly down the reuse road, not sure why everyone is assuming it will be trivial to hit a moving (tiny -- it's a big ocean) ship a thousand kilometers down range with a returning seven meter diameter orbital rocket.  Just because someone makes it look easy, doesn't mean it is easy.  Blue also has the 'graditum' thing going on from one test sequence to the next... might mean there are long stretches between attempts.  I assume there will be many attempts before the full cycle is demonstrated solidly.  I also think there is as much a chance that Blue will give the entire thing up as there is nailing it on the first try.
« Last Edit: 05/17/2018 12:26 AM by AncientU »
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Offline deruch

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Re: Business Case For New Glenn
« Reply #126 on: 05/17/2018 01:57 AM »
And Blue will nail reuse very quickly. They aren't developing New Shepard for fun, and New Glenn has lots of margins for reuse. Blue isn't SpaceX. They aren't going to crash lots of rockets before succeeding with landing New Glenn. They don't have to make money on every flight or iterate fast or run at very slim margins. If the first New Glenn survives reentry, I pretty sure it will stick the landing perfectly.

Some things will only be learned by testing at the edges of the envelope.  Why do you think SpaceX is continuing to "crash" rockets even after succeeding with recovery/reuse?  I don't think Blue will be able to achieve the same level of rapid/cheap reuse that SpaceX seems on the verge of achieving without crashing a few rockets of their own.  Even if they are able to stick the landing from the beginning that may not be enough to get them where they want to go.
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Offline johnfwhitesell

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Re: Business Case For New Glenn
« Reply #127 on: 05/17/2018 02:12 AM »
The engine alone probably cost them 50 million dollars to make.  Or approach the problem from the other side and look at overhead.  They are going to be spending the ammoritization cost of their initial 2.5 billion (plus several years interest before ammoritization starts) plus a billion in yearly spending.  So that's about 1.35 billion or so.  Divide that 1.35 billion by the number of rockets they will be building a year.  Two?  Four?
There's no possible way BE-4 cost $50 million. The whole flight set of BE-4s on a New Glenn might cost about $40M, based on the reports that Blue is selling them to ULA for $8M each and probably tacking a 30% profit on that.

So there were two possible ways for you to read my post:
A) I arrived at nearly the same figure as you but made a typo when typing "engines"
B) I am not only a grossly uninformed idiot but I am furthermore incapable of basic arithmatic

You really dont seem to like me.

Offline envy887

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Re: Business Case For New Glenn
« Reply #128 on: 05/17/2018 03:55 AM »
And Blue will nail reuse very quickly. They aren't developing New Shepard for fun, and New Glenn has lots of margins for reuse. Blue isn't SpaceX. They aren't going to crash lots of rockets before succeeding with landing New Glenn. They don't have to make money on every flight or iterate fast or run at very slim margins. If the first New Glenn survives reentry, I pretty sure it will stick the landing perfectly.

Some things will only be learned by testing at the edges of the envelope.  Why do you think SpaceX is continuing to "crash" rockets even after succeeding with recovery/reuse?  I don't think Blue will be able to achieve the same level of rapid/cheap reuse that SpaceX seems on the verge of achieving without crashing a few rockets of their own.  Even if they are able to stick the landing from the beginning that may not be enough to get them where they want to go.

Maybe they will crash a few. But they are completely different approaches. SpaceX starts outside the envelope and fails until they find out what works. Blue plays it safe, and then pushes the envelope until they get where they need to go.

New Glenn is a giant, enormous, huge rocket. It's gigantic. Did I mention it was big?

It has considerably more payload capability than Falcon Heavy with full booster reuse, and I think Blue is even sandbagging those numbers considerably. It will have huge amounts of margin to stay within a very safe envelope on the first few flights. And that's where Blue is going to keep it.

Reuse isn't optional with New Glenn, and Blue will spent the development time and money and iterations to make reuse work early.

Offline envy887

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Re: Business Case For New Glenn
« Reply #129 on: 05/17/2018 04:03 AM »
The engine alone probably cost them 50 million dollars to make.  Or approach the problem from the other side and look at overhead.  They are going to be spending the ammoritization cost of their initial 2.5 billion (plus several years interest before ammoritization starts) plus a billion in yearly spending.  So that's about 1.35 billion or so.  Divide that 1.35 billion by the number of rockets they will be building a year.  Two?  Four?
There's no possible way BE-4 cost $50 million. The whole flight set of BE-4s on a New Glenn might cost about $40M, based on the reports that Blue is selling them to ULA for $8M each and probably tacking a 30% profit on that.

So there were two possible ways for you to read my post:
A) I arrived at nearly the same figure as you but made a typo when typing "engines"
B) I am not only a grossly uninformed idiot but I am furthermore incapable of basic arithmatic

You really dont seem to like me.
I'm sorry, I never considered that you meant to pluralize "engine". That makes way more sense.

Still, you are way off base conflating profit and payback. I don't think Bezos ever expects to see a payback on the money he's spending to develop New Glenn. But he probably does expect New Glenn to operate at a profit and compete with Falcon 9 and Heavy.

So ignore any amortization of development costs, including demo flights and a couple booster iterations to get to fast reuse. Just look at marginal costs, and assume the booster is reasonable reusable.

Offline ZachF

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Re: Business Case For New Glenn
« Reply #130 on: 05/17/2018 02:15 PM »
And Blue will nail reuse very quickly. They aren't developing New Shepard for fun, and New Glenn has lots of margins for reuse. Blue isn't SpaceX. They aren't going to crash lots of rockets before succeeding with landing New Glenn. They don't have to make money on every flight or iterate fast or run at very slim margins. If the first New Glenn survives reentry, I pretty sure it will stick the landing perfectly.

Some things will only be learned by testing at the edges of the envelope.  Why do you think SpaceX is continuing to "crash" rockets even after succeeding with recovery/reuse?  I don't think Blue will be able to achieve the same level of rapid/cheap reuse that SpaceX seems on the verge of achieving without crashing a few rockets of their own.  Even if they are able to stick the landing from the beginning that may not be enough to get them where they want to go.

Maybe they will crash a few. But they are completely different approaches. SpaceX starts outside the envelope and fails until they find out what works. Blue plays it safe, and then pushes the envelope until they get where they need to go.

New Glenn is a giant, enormous, huge rocket. It's gigantic. Did I mention it was big?

It has considerably more payload capability than Falcon Heavy with full booster reuse, and I think Blue is even sandbagging those numbers considerably. It will have huge amounts of margin to stay within a very safe envelope on the first few flights. And that's where Blue is going to keep it.

Reuse isn't optional with New Glenn, and Blue will spent the development time and money and iterations to make reuse work early.

Not only does New Glenn have a lot of margin, it has a lot of room for future growth.

A "New Glenn Full Thrust" with higher-pressure BE-4s (plenty room to increase pressure) and densified propellants would be a particularly monstrous rocket. Could put up strong numbers probably even with full re-use on the upper stage.

Offline DJPledger

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Re: Business Case For New Glenn
« Reply #131 on: 05/17/2018 07:33 PM »
I'm not sure we can have a discussion about the business case for New Glenn right now.  We don't know enough about the rocket. 

On the one hand, Blue Origin's web site shows a BE-4U powered second stage and lists payload performance numbers.  On the other hand, Space News reported some time ago that the second stage would be BE-3U powered, using LH2 rather than methane fuel.  This change seemed directed at the USAF "EELV-2" competition, so we can assume that this New Glenn version is being designed to meet those payload goals - which are mostly much less than the original claimed capabilities. 

New Glenn might not now be as capable as originally claimed (because it doesn't need to be to meet this customer's needs), or it might be more capable (for some other unknown goal).  And who knows what other, unannounced changes Blue Origin has made to the design?

 - Ed Kyle
NG may have no business case at all and is likely to be a technological test bed for technologies to be used in NA which will likely become BO's workhorse rocket like SpaceX's BFR plans to be. If NG wins a load of launch contracts then that will be a bonus on the road to NA. NG likely to be retired once NA is up and running.

Offline kraisee

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Re: Business Case For New Glenn
« Reply #132 on: 05/17/2018 09:30 PM »
I don't think anyone outside of the company has enough information to make a reasonable estimate about Blue's business case at this point. My guesses:

I personally expect Bezos will be quite happy to write-off the sunk development costs entirely, so I don't think that's a long-term factor.

After that most of it boils down to flight rate. I don't think there are sufficient existing satellite customers to allow Blue to get their prices below those of SpaceX's existing offerings (at least not profitably), so for them to be able to gain traction in the industry they're going to need to find, or create, a large amount of brand-new launch demand in order to enable the high fixed annual costs (and the $1.35bn figure mentioned above, if real, is not dramatically different to SpX's fixed annual costs BTW) to be amortised effectively.

SpaceX have chosen to drive a very high initial flight rate themselves, specifically through Starlink.

Bezos certainly has deep enough pockets to pay for an equivalent project to drive Blue's flight rate, if he can't find anyone else willing to do so. He might try a comms constellation of his own, a major human spaceflight/industrial/tourism system, an SBSP system, a large-scale asteroid mining architecture, or something else entirely - there are plenty of options and it depends on what business opportunity floats his personal risk/benefit boat.

Then it mostly comes down to the reflight costs. From what I can see, the Falcon family isn't intended to get down to a real "minimum costs" system for SpX and they are waiting for BFR to drive the reflight costs down as much as possible.   This does leave an opportunity for Blue to exploit.

Is New Glenn designed to minimise reflight costs from day 1?   I don't know.   Perhaps, though.   It better, or they've already lost this fight.   Assuming it is, it should follow that a genuine "minimum cost" 45 ton launcher could theoretically be close to 35-40% the reflight cost of SpX's "minimum cost" 150 ton launcher.   If the majority of customer payloads require less than 45 tons, why would customers pay for the bigger launcher at nearly triple the price?

That might be where Bezos is trying to position his wares.   There are just too many unknowns to be sure at this stage though.    Its all speculation until we actually start to see them compete head-to-head.

Ross.
« Last Edit: 05/17/2018 09:42 PM by kraisee »
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Offline Lemurion

Re: Business Case For New Glenn
« Reply #133 on: 05/25/2018 12:59 AM »
I don't think anyone outside of the company has enough information to make a reasonable estimate about Blue's business case at this point. My guesses:

I personally expect Bezos will be quite happy to write-off the sunk development costs entirely, so I don't think that's a long-term factor.

After that most of it boils down to flight rate. I don't think there are sufficient existing satellite customers to allow Blue to get their prices below those of SpaceX's existing offerings (at least not profitably), so for them to be able to gain traction in the industry they're going to need to find, or create, a large amount of brand-new launch demand in order to enable the high fixed annual costs (and the $1.35bn figure mentioned above, if real, is not dramatically different to SpX's fixed annual costs BTW) to be amortised effectively.

SpaceX have chosen to drive a very high initial flight rate themselves, specifically through Starlink.

Bezos certainly has deep enough pockets to pay for an equivalent project to drive Blue's flight rate, if he can't find anyone else willing to do so. He might try a comms constellation of his own, a major human spaceflight/industrial/tourism system, an SBSP system, a large-scale asteroid mining architecture, or something else entirely - there are plenty of options and it depends on what business opportunity floats his personal risk/benefit boat.

Then it mostly comes down to the reflight costs. From what I can see, the Falcon family isn't intended to get down to a real "minimum costs" system for SpX and they are waiting for BFR to drive the reflight costs down as much as possible.   This does leave an opportunity for Blue to exploit.

Is New Glenn designed to minimise reflight costs from day 1?   I don't know.   Perhaps, though.   It better, or they've already lost this fight.   Assuming it is, it should follow that a genuine "minimum cost" 45 ton launcher could theoretically be close to 35-40% the reflight cost of SpX's "minimum cost" 150 ton launcher.   If the majority of customer payloads require less than 45 tons, why would customers pay for the bigger launcher at nearly triple the price?

That might be where Bezos is trying to position his wares.   There are just too many unknowns to be sure at this stage though.    Its all speculation until we actually start to see them compete head-to-head.

Ross.

The thing is that we already know New Glenn isn't designed to minimize reflight costs. According to what little information we've got Blue is looking at 12 flights per year, and landing several hundred kilometers downrange on a large vessel. Minimizing costs would likely require a higher cadence and RTLS recovery.




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