Impact of SpaceX rideshare on small sat launchers market

[DanClemmensen]

I didn't say anything about "illegal" (the question of whether something counts as illegal dumping even if internal costs are so low you're still actually making a profit is separate), but intent: did SpaceX decide to take as much of the business opportunity as possible because it was a good business opportunity, or because doing so would deprive a potential future competitor of funds and ensure they die on the vine before growing big enough to become an actual competitor? And yes, the answer can be "both."

If I was Elon, then definitely both. Again, if you can do that while still making a profit, then NOT doing it is just bad business. Should you charge artificially inflated prices just to ensure competitors get a slice of the pie? Of course not.

It's a bit more nuanced than that. When your internal costs are a whole lot lower than any competitor, you can choose a price that optimizes your total profit, just as if there were no competition. If the market is elastic (i.e., lower prices attract more customers) then charging less than the optimal price is probably a business strategy aimed at starving the competition.

I suspect that SpaceX is ignoring the competition when they set their prices. I suspect that Beck is even more upset by being ignored than he is by being out-competed.

[zubenelgenubi]

I suspect that Beck is even more upset by being ignored than he is by being out-competed.

I especially agree with the above assertion.👍 💯 🙌

[StraumliBlight]

Perhaps the timing is coincidental: maybe Musk would have been convinced to operate the Transporter missions regardless. Perhaps the meeting with Beck didn't convince Musk that he needed to crush Rocket Lab, but rather convinced him that if Rocket Lab saw a viable business opportunity with small satellites, SpaceX should make money from that segment too. But the flip-flop from "This really fraks me off. We are never going to do this" to making this a regularly-scheduled launch certainly seems like something changed Musk's mind.

Its not like the concept is particularly novel; ISRO has been doing similar missions for 25 years (e.g. PSLV-C38 launched 88 satellites in June 2017, 3 years before SpaceX).

If their entire business plan is hoping SpaceX leave money on the table, they're going to have rude awakening when Starship is operational.

[M.E.T.]

I didn't say anything about "illegal" (the question of whether something counts as illegal dumping even if internal costs are so low you're still actually making a profit is separate), but intent: did SpaceX decide to take as much of the business opportunity as possible because it was a good business opportunity, or because doing so would deprive a potential future competitor of funds and ensure they die on the vine before growing big enough to become an actual competitor? And yes, the answer can be "both."

If I was Elon, then definitely both. Again, if you can do that while still making a profit, then NOT doing it is just bad business. Should you charge artificially inflated prices just to ensure competitors get a slice of the pie? Of course not.

Pushing rivals into bankruptcy is surely a key part of successful business practice.

So ultimately, I don't think you actually disagree with Peter Beck about what SpaceX did. You just believe that it was appropriate for them to do so, and instead of complaining about it to the media, Beck should just lay down and die.

I disagree with Beck suggesting this is somehow "shady" or "anti-competitive".

I disagree with him putting forward an affable, nice guy front to his fans, but launching constant passive aggressive snipes at Elon.

An early example was the infamous Carbon Fiber vs Stainless Steel video in the Neutron introduction presentation. Another was the snipe at SpaceX's barge landings, before he was forced to pivot to Neutron barge landings himself.

Another was his reference to Elon as "Howard Hughes" in his recent fan interview on Youtube. Then we had him claiming Elon is engaging in anti-competitive behaviour and shady business practices.

In summary, this guy has a real issue with Elon Musk. And the more SpaceX expands its dominance, the more it seems to grate him, and the more his rhetoric escalates.

[M.E.T.]

I didn't say anything about "illegal" (the question of whether something counts as illegal dumping even if internal costs are so low you're still actually making a profit is separate), but intent: did SpaceX decide to take as much of the business opportunity as possible because it was a good business opportunity, or because doing so would deprive a potential future competitor of funds and ensure they die on the vine before growing big enough to become an actual competitor? And yes, the answer can be "both."

If I was Elon, then definitely both. Again, if you can do that while still making a profit, then NOT doing it is just bad business. Should you charge artificially inflated prices just to ensure competitors get a slice of the pie? Of course not.

It's a bit more nuanced than that. When your internal costs are a whole lot lower than any competitor, you can choose a price that optimizes your total profit, just as if there were no competition. If the market is elastic (i.e., lower prices attract more customers) then charging less than the optimal price is probably a business strategy aimed at starving the competition.

I suspect that SpaceX is ignoring the competition when they set their prices. I suspect that Beck is even more upset by being ignored than he is by being out-competed.

Well, it's even more nuanced than even that. Optimizing your total profit over what timeframe? The next 12 months? Or the next 12 years?

And even discounting that calculation, one of the competing offers they have to consider is the price and convenience offered by Electron. So their Transporter and Bandwagon offers have to be positioned at a more attractive point than that alternative. So yes, the price would be higher if Rocketlab wasn't waiting in the wings. But since they are, the price is lower, and Beck is left without a customer and unhappy.

[trimeta]

I didn't say anything about "illegal" (the question of whether something counts as illegal dumping even if internal costs are so low you're still actually making a profit is separate), but intent: did SpaceX decide to take as much of the business opportunity as possible because it was a good business opportunity, or because doing so would deprive a potential future competitor of funds and ensure they die on the vine before growing big enough to become an actual competitor? And yes, the answer can be "both."

If I was Elon, then definitely both. Again, if you can do that while still making a profit, then NOT doing it is just bad business. Should you charge artificially inflated prices just to ensure competitors get a slice of the pie? Of course not.

Pushing rivals into bankruptcy is surely a key part of successful business practice.

So ultimately, I don't think you actually disagree with Peter Beck about what SpaceX did. You just believe that it was appropriate for them to do so, and instead of complaining about it to the media, Beck should just lay down and die.

I disagree with Beck suggesting this is somehow "shady" or "anti-competitive".

I disagree with him putting forward an affable, nice guy front to his fans, but launching constant passive aggressive snipes at Elon.

An early example was the infamous Carbon Fiber vs Stainless Steel video in the Neutron introduction presentation. Another was the snipe at SpaceX's barge landings, before he was forced to pivot to Neutron barge landings himself.

Another was his reference to Elon as "Howard Hughes" in his recent fan interview on Youtube. Then we had him claiming Elon is engaging in anti-competitive behaviour and shady business practices.

In summary, this guy has a real issue with Elon Musk. And the more SpaceX expands its dominance, the more it seems to grate him, and the more his rhetoric escalates.

I did make sure to say you agree with him "about what SpaceX did [with Transporter]" in particular, not that you agree with everything he's ever said or done. And it does seem like you'd like him to stop making public statements of any kind and simply accept bankruptcy. So honestly, I'm not seeing anything here that disputes my earlier characterization of you.

Side-note, I would certainly agree that Beck wants to be seen as a peer of Musk's (this comes up in the Ashlee Vance excerpt as well), and the fact that Rocket Lab is objectively not in the same category as SpaceX grates on him. Which leads to some stunts (the carbon fiber vs. stainless steel "demo") and attempts to differentiate from SpaceX that ultimately backfire. Seems like one can't be the CEO of a rocket company without at least some amount of unhealthy ego.

[M.E.T.]

I didn't say anything about "illegal" (the question of whether something counts as illegal dumping even if internal costs are so low you're still actually making a profit is separate), but intent: did SpaceX decide to take as much of the business opportunity as possible because it was a good business opportunity, or because doing so would deprive a potential future competitor of funds and ensure they die on the vine before growing big enough to become an actual competitor? And yes, the answer can be "both."

If I was Elon, then definitely both. Again, if you can do that while still making a profit, then NOT doing it is just bad business. Should you charge artificially inflated prices just to ensure competitors get a slice of the pie? Of course not.

Pushing rivals into bankruptcy is surely a key part of successful business practice.

So ultimately, I don't think you actually disagree with Peter Beck about what SpaceX did. You just believe that it was appropriate for them to do so, and instead of complaining about it to the media, Beck should just lay down and die.

I disagree with Beck suggesting this is somehow "shady" or "anti-competitive".

I disagree with him putting forward an affable, nice guy front to his fans, but launching constant passive aggressive snipes at Elon.

An early example was the infamous Carbon Fiber vs Stainless Steel video in the Neutron introduction presentation. Another was the snipe at SpaceX's barge landings, before he was forced to pivot to Neutron barge landings himself.

Another was his reference to Elon as "Howard Hughes" in his recent fan interview on Youtube. Then we had him claiming Elon is engaging in anti-competitive behaviour and shady business practices.

In summary, this guy has a real issue with Elon Musk. And the more SpaceX expands its dominance, the more it seems to grate him, and the more his rhetoric escalates.

I did make sure to say you agree with him "about what SpaceX did [with Transporter]" in particular, not that you agree with everything he's ever said or done. And it does seem like you'd like him to stop making public statements of any kind and simply accept bankruptcy. So honestly, I'm not seeing anything here that disputes my earlier characterization of you.

Side-note, I would certainly agree that Beck wants to be seen as a peer of Musk's (this comes up in the Ashlee Vance excerpt as well), and the fact that Rocket Lab is objectively not in the same category as SpaceX grates on him. Which leads to some stunts (the carbon fiber vs. stainless steel "demo") and attempts to differentiate from SpaceX that ultimately backfire. Seems like one can't be the CEO of a rocket company without at least some amount of unhealthy ego.

Fair assessment for the most part. Other than the bit about what I said I agree with. To be clear, I absolutely don't agree with Beck's characterisation of SpaceX rideshare services as shady or anti competitive. In fact, I believe there is absolutely nothing wrong with them doing it.

[trimeta]

I would maybe question what, exactly, you do consider to be "anti-competitive," if "pushing rivals into bankruptcy," far from being anti-competitive, is "surely a key part of successful business practice." But this comes down to definitions.

[M.E.T.]

I would maybe question what, exactly, you do consider to be "anti-competitive," if "pushing rivals into bankruptcy," far from being anti-competitive, is "surely a key part of successful business practice." But this comes down to definitions.

Well by that definition, launching a rocket for $1 cheaper than a rival would be anti competitive. And a competitor going bankrupt due to some action on your part would somehow be immoral.

To me anti competitive means something illegal. If not illegal, it is normal business practice.

[DanClemmensen]

I would maybe question what, exactly, you do consider to be "anti-competitive," if "pushing rivals into bankruptcy," far from being anti-competitive, is "surely a key part of successful business practice." But this comes down to definitions.

It's a direct consequence of free market economics. In a free market, price ends up at cost of goods sold plus enough profit to ensure the viability of the producer. The competitor with the lowest cost of good sold drives competitors out of business. The only reason that there is any competition is that the competitors innovate to reduce cost, so the lead changes.  In the real world the market is not completely free, and the competitors differentiate their products, so the simple model almost never happens, but it is still the underlying baseline.

Rocket Labs can remain viable if their product can meet requirements that SpaceX cannot meet at the same price, for a large enough customer base. It is not SpaceX' responsibility to maintain this situation.

[M.E.T.]

I would maybe question what, exactly, you do consider to be "anti-competitive," if "pushing rivals into bankruptcy," far from being anti-competitive, is "surely a key part of successful business practice." But this comes down to definitions.

It's a direct consequence of free market economics. In a free market, price ends up at cost of goods sold plus enough profit to ensure the viability of the producer. The competitor with the lowest cost of good sold drives competitors out of business. The only reason that there is any competition is that the competitors innovate to reduce cost, so the lead changes.  In the real world the market is not completely free, and the competitors differentiate their products, so the simple model almost never happens, but it is still the underlying baseline.

Rocket Labs can remain viable if their product can meet requirements that SpaceX cannot meet at the same price, for a large enough customer base. It is not SpaceX' responsibility to maintain this situation.

Correct. And the innovation and strategies should be adapted constantly to drive your competitor out of business “ever more effectively”.

If one party simply can’t come up with a better counter to a rival’s temporary dominance, well, then they go out of business. This is what Rocketlab is facing in the launch market.

Hence Beck’s latest strategy of targeting the US Government decision makers through public (and probably even more non-public) complaints, in the hope of steering some business to Rocket Lab, which their pure product offering is not able to do on its own merit when matched directly with SpaceX’s offering.

[trimeta]

I would suggest that there's a difference if you lower your prices to below what the market will bear (meaning, even with elasticity you're not gaining additional customers faster than you're losing money by charging existing customers less, thus you're knowingly leaving money on the table), but DanClemmensen would argue that SpaceX has never done this, while M.E.T. would argue that although SpaceX definitely has done this, it is not illegal to do so (as long as you're still making some profit even with the lowered prices), and since the lower profit in the short-term is offset by the higher profit in the long-term when your competitors have all been driven bankrupt, in some sense it would be abusive to your shareholders to not use this business practice. So I wouldn't be changing either of your minds.

[M.E.T.]

I would suggest that there's a difference if you lower your prices to below what the market will bear (meaning, even with elasticity you're not gaining additional customers faster than you're losing money by charging existing customers less, thus you're knowingly leaving money on the table), but DanClemmensen would argue that SpaceX has never done this, while M.E.T. would argue that although SpaceX definitely has done this, it is not illegal to do so (as long as you're still making some profit even with the lowered prices), and since the lower profit in the short-term is offset by the higher profit in the long-term when your competitors have all been driven bankrupt, in some sense it would be abusive to your shareholders to not use this business practice. So I wouldn't be changing either of your minds.

Good summary.

Again, there is nuance here. How about if you start a new service (e.g. Transporter or Bandwagon) that needs to build up a client base, so you do that through lower prices for say the first 3 years. Once people get used to its convenience and regularity, you gradually up the prices over time. You operate it profitably even now, but not as profitably as say the benefits of an extra Starlink launch. But that’s ok, given the longer term picture.

Or, another scenario - you know that Starlink launches will soon shift to the Starship launch platform and you will be left with ~20 F9 boosters with maybe 100+ launches left between them, which can service dozens of Transporter and Bandwagon missions for years to come as you run down the remaining lifespan of your legacy fleet.

In fact, Beck alluded to this very scenario in one of his recent chats where he tried to counter the idea that SpaceX’s excess F9 fleet post Starship will flood the market with even cheaper launches as they are no longer needed for Starlink and can just be gradually used up over time.

Point is, there are many long term reasons not to extract the maximum possible profit from each individual launch in the present.

[DanClemmensen]

I would suggest that there's a difference if you lower your prices to below what the market will bear (meaning, even with elasticity you're not gaining additional customers faster than you're losing money by charging existing customers less, thus you're knowingly leaving money on the table), but DanClemmensen would argue that SpaceX has never done this, while M.E.T. would argue that although SpaceX definitely has done this, it is not illegal to do so (as long as you're still making some profit even with the lowered prices), and since the lower profit in the short-term is offset by the higher profit in the long-term when your competitors have all been driven bankrupt, in some sense it would be abusive to your shareholders to not use this business practice. So I wouldn't be changing either of your minds.

With respect: I do not know whether or not SpaceX has done this. What is said was that I have seen no evidence that SpaceX has done this. Absence of evidence is not evidence of absence. For all I know, Elon may have a team of evil business analyst minions hidden deep in his underground evil genius lair dedicated full-time to killing Rocket Lab. However, SpaceX' pricing policies can be explained without reference to Rocket Lab at all.

[M.E.T.]

I would suggest that there's a difference if you lower your prices to below what the market will bear (meaning, even with elasticity you're not gaining additional customers faster than you're losing money by charging existing customers less, thus you're knowingly leaving money on the table), but DanClemmensen would argue that SpaceX has never done this, while M.E.T. would argue that although SpaceX definitely has done this, it is not illegal to do so (as long as you're still making some profit even with the lowered prices), and since the lower profit in the short-term is offset by the higher profit in the long-term when your competitors have all been driven bankrupt, in some sense it would be abusive to your shareholders to not use this business practice. So I wouldn't be changing either of your minds.

With respect: I do not know whether or not SpaceX has done this. What is said was that I have seen no evidence that SpaceX has done this. Absence of evidence is not evidence of absence. For all I know, Elon may have a team of evil business analyst minions hidden deep in his underground evil genius lair dedicated full-time to killing Rocket Lab. However, SpaceX' pricing policies can be explained without reference to Rocket Lab at all.

Haha. I know it was said partly in jest, but I would not see those minions as evil. Look at Tesla price cuts utterly destroying Rivian, Lucid, Fisker and others at the moment. That’s entirely rational behaviour, to damage a competitor through your pricing strategy.

[RedLineTrain]

I suspect that SpaceX is ignoring the competition when they set their prices.

Even this milquetoast statement is slanderous to SpaceX.

We can be 100% certain that the competition is not a variable in how SpaceX sets its rideshare prices.  The first reason is logical.  The second and third are empirical.

(1) The competition's prices do not give any useful information to SpaceX.  Rather, factoring in those prices just enters noise into SpaceX's testing of the market.

(2) SpaceX hasn't been sued.  If there was any shred of potential SpaceX anti-competitive behavior, you can be sure that Rocket Lab and others would be in SpaceX's shorts legally.

(3) SpaceX's prices do not resemble the prices that others offer.

We have seen quite a few companies testing new markets without reference to competitors.  Perhaps the most famous is Ford's pricing on its Model T.

[DanClemmensen]

I would suggest that there's a difference if you lower your prices to below what the market will bear (meaning, even with elasticity you're not gaining additional customers faster than you're losing money by charging existing customers less, thus you're knowingly leaving money on the table), but DanClemmensen would argue that SpaceX has never done this, while M.E.T. would argue that although SpaceX definitely has done this, it is not illegal to do so (as long as you're still making some profit even with the lowered prices), and since the lower profit in the short-term is offset by the higher profit in the long-term when your competitors have all been driven bankrupt, in some sense it would be abusive to your shareholders to not use this business practice. So I wouldn't be changing either of your minds.

With respect: I do not know whether or not SpaceX has done this. What is said was that I have seen no evidence that SpaceX has done this. Absence of evidence is not evidence of absence. For all I know, Elon may have a team of evil business analyst minions hidden deep in his underground evil genius lair dedicated full-time to killing Rocket Lab. However, SpaceX' pricing policies can be explained without reference to Rocket Lab at all.

Haha. I know it was said partly in jest, but I would not see those minions as evil. Look at Tesla price cuts utterly destroying Rivian, Lucid, Fisker and others at the moment. That’s entirely rational behaviour, to damage a competitor through your pricing strategy.

Tesla is not SpaceX. Tesla appears to make vehicles as fast as its factories can produce them, and then set prices to clear their inventory, basically without regard to the competition. Again, the effect on their competition is a side effect, and there is no evidence of deliberate attempts to drive others out of the market. It's not just the tiny pure-play EV manufacturers. The rest of the car industry is also getting hit by Tesla. Possibly, SpaceX out-sourced their evil business analysis work to the secret Tesla evil minion department, but we have no evidence.

The fundamental difference between Tesla and SpaceX is that SpaceX needed a captive market for their LV business in order to drive launch demand, so they created it themselves with Starlink.

[matthewkantar]

I didn't say anything about "illegal" (the question of whether something counts as illegal dumping even if internal costs are so low you're still actually making a profit is separate), but intent: did SpaceX decide to take as much of the business opportunity as possible because it was a good business opportunity, or because doing so would deprive a potential future competitor of funds and ensure they die on the vine before growing big enough to become an actual competitor? And yes, the answer can be "both."

If I was Elon, then definitely both. Again, if you can do that while still making a profit, then NOT doing it is just bad business. Should you charge artificially inflated prices just to ensure competitors get a slice of the pie? Of course not.

Pushing rivals into bankruptcy is surely a key part of successful business practice.

So ultimately, I don't think you actually disagree with Peter Beck about what SpaceX did. You just believe that it was appropriate for them to do so, and instead of complaining about it to the media, Beck should just lay down and die.

Uh, no. Beck should compete with his competitors. I have not dug down into SpaceX/Rocket Lab pricing, but IF SpaceX prices  are 1/6th of what Rocket Lab gets(as cited above), and IF SpaceX makes money on them, then Rocket Lab will go out of business.

Beck has yawed around with claims SpaceX couldn’t beat individual launches, reuse wasn’t economic, etc etc. It’s business, not charity. Pay attention to what Stoke is doing. Complaining ain’t gonna fix Beck’s problems.

[trimeta]

I suspect that SpaceX is ignoring the competition when they set their prices.

Even this milquetoast statement is slanderous to SpaceX.

We can be 100% certain that the competition is not a variable in how SpaceX sets its rideshare prices.  The first reason is logical.  The second and third are empirical.

(1) The competition's prices do not give any useful information to SpaceX.  Rather, factoring in those prices just enters noise into SpaceX's testing of the market.

(2) SpaceX hasn't been sued.  If there was any shred of potential SpaceX anti-competitive behavior, you can be sure that Rocket Lab and others would be in SpaceX's shorts legally.

(3) SpaceX's prices do not resemble the prices that others offer.

We have seen quite a few companies testing new markets without reference to competitors.  Perhaps the most famous is Ford's pricing on its Model T.

Per M.E.T.'s interpretation of antitrust law, setting prices with the specific intent of undercutting competitors is not illegal, thus the lack of legal action against SpaceX does not prove anything regarding how SpaceX sets their prices.

[matthewkantar]

I suspect that SpaceX is ignoring the competition when they set their prices.

Even this milquetoast statement is slanderous to SpaceX.

We can be 100% certain that the competition is not a variable in how SpaceX sets its rideshare prices.  The first reason is logical.  The second and third are empirical.

(1) The competition's prices do not give any useful information to SpaceX.  Rather, factoring in those prices just enters noise into SpaceX's testing of the market.

(2) SpaceX hasn't been sued.  If there was any shred of potential SpaceX anti-competitive behavior, you can be sure that Rocket Lab and others would be in SpaceX's shorts legally.

(3) SpaceX's prices do not resemble the prices that others offer.

We have seen quite a few companies testing new markets without reference to competitors.  Perhaps the most famous is Ford's pricing on its Model T.

Per M.E.T.'s interpretation of antitrust law, setting prices with the specific intent of undercutting competitors is not illegal, thus the lack of legal action against SpaceX does not prove anything regarding how SpaceX sets their prices.

I think the point here is that SpaceX could achieve the same result by setting prices at 9/10ths the competition. If they are at 1/6th, one can infer they are not undercutting, they are in a different arena.