Impact of SpaceX rideshare on small sat launchers market

[trimeta]

What's interesting is that Dan Piemont doesn't seem to actually rebut any of the substantive claims from the NY Times article (not even the weak ones regarding government investment or lobbying/hiring government officials), he basically just says "all of that is legal, so we've just got to deal with it and compete with SpaceX anyway."

This struck me as the most important takeaway from Piemont's post:

Without new entrants, the best option to launch a 2-ton satellite to polar LEO today is to use 15% of the capacity of a $60MM+ launch vehicle. So there’s plenty of room for improvement purely through diversification. LEO Rideshare + OMV doesn’t solve this due to the OMV costs which are not substantially lower than small ELV costs.

It raises the question: if there's an opportunity there, why hasn't SpaceX themselves already jumped on it?  Unlike most of the startups, they've already got most of the components developed and in current production at rates that make their cost basically unbeatable, together with a bunch of skilled engineers and of validated models for just about everything needed to get it done quickly and cheaply.  And even with those advantages it apparently doesn't make economic sense to develop and field such a launcher.

So why would it make sense for a startup to try it?


Last Edit: Today at 10:07:00 (formatting)

I would imagine it comes down to opportunity cost: any resources they put towards such a project are resources they're not putting towards Starship, and Starship has a significantly higher upside.

[RedLineTrain]

Correct.  That is what large businesses do.  They lobby, they try to sell their services to the customers of competitors, etc.  There are legal frameworks in place to keep everything pretty level, and as long as they are following those requirements, there is nothing to rebut.

I think what makes this somewhat unique is that the SCALE.  SpaceX isn't just the major competitor.  They are completely dominating the market.  It makes it seem more unfair to competitors, but that is just how a controlled free market works.  If it becomes unbearable to the public, the legal framework will be tweaked.  Until then, there is nothing to rebut.

This is merely a function of the fact that returns to scale in the reusable launch business are enormous.  Those returns to scale dominate.

This is great news, because we as a society benefit greatly from the scale that SpaceX is achieving.  SpaceX only captures a small portion of that benefit for itself.

[Action]

What's interesting is that Dan Piemont doesn't seem to actually rebut any of the substantive claims from the NY Times article (not even the weak ones regarding government investment or lobbying/hiring government officials), he basically just says "all of that is legal, so we've just got to deal with it and compete with SpaceX anyway."

This struck me as the most important takeaway from Piemont's post:

Without new entrants, the best option to launch a 2-ton satellite to polar LEO today is to use 15% of the capacity of a $60MM+ launch vehicle. So there’s plenty of room for improvement purely through diversification. LEO Rideshare + OMV doesn’t solve this due to the OMV costs which are not substantially lower than small ELV costs.

It raises the question: if there's an opportunity there, why hasn't SpaceX themselves already jumped on it?  Unlike most of the startups, they've already got most of the components developed and in current production at rates that make their cost basically unbeatable, together with a bunch of skilled engineers and of validated models for just about everything needed to get it done quickly and cheaply.  And even with those advantages it apparently doesn't make economic sense to develop and field such a launcher.

So why would it make sense for a startup to try it?


Last Edit: Today at 10:07:00 (formatting)

I would imagine it comes down to opportunity cost: any resources they put towards such a project are resources they're not putting towards Starship, and Starship has a significantly higher upside.

It's not zero-sum.  SpaceX can finance and add resources to do whatever provides sufficient return - it's not like an OMV is so demanding that it will require only their greatest minds.  It's a side project at most.

And SpaceX has shown in the past a willingness to enter non-traditional lines of business that it sees as positive NPV.  That it isn't entering this fairly obvious one suggests it's not that attractive.

Maybe it's better to let another firm do the legwork and buy them down the road?  Maybe it's better to wait for the government to feel the need and issue a generous contract?  Maybe there isn't much willingness to pay in the market?  I don't really know.  But the issue isn't that SpaceX only has access to a finite amount of money.

[RedLineTrain]

In other contexts, the military accepts single suppliers.  It is familiar with such arrangements.  It seems likely that they would be more or less comfortable with such in space launch, if that single supplier is performing well.

Consider this (not pleasant but bear with me) - there is a loss of crew on F9 and it is grounded for an indefinite period of time. There is no more guaranteed access to space with such a single provider. I would venture to say that the stakes are probably quite a bit higher for LVs than for the examples of the military, although I don't know what sort of examples you're referring to and how they would apply.

Very much disagree that "assured access to space" is a meaningless statement. Wise to not put all of your eggs in one basket and subsidize other LVs if need be.

SpaceX if still a private company and could still fail, even though it doesn't seem likely right now.

From my perspective, you have it backwards.

Companies have some good attributes that governments do not, such as the ability to move quickly.  Privately held founder controlled companies have some good attributes that publicly held companies managed by professional managers do not, such as agency to exploit convictions and to bounce back from failure despite external pressure.  The risk of failure is less for SpaceX for outsized achievements.  Outsized achievements in a healthy economy are the basis of national military power.  The trump card.  The commanding heights.

Subsidizing rocket companies that wish to be competitors to SpaceX sounds like a good idea on its face.  But that desire to shield them from market discipline is a recipe for failure.  The whole point of a privately held founder controlled company is to operate under market discipline, so we should tread carefully there.

That said, I can think of some basic things that we can do to make their lives easier, like facilitating suitable launch ranges by clearing red tape, or providing some basic infrastructure.  I think that the Space Force learned its lesson with pushing folks to Omelek or Kodiak, but I don't know for sure.  All this help should be offered to SpaceX as well and I would imagine that the help would be sized to its ambitions.

[Exastro]

What's interesting is that Dan Piemont doesn't seem to actually rebut any of the substantive claims from the NY Times article (not even the weak ones regarding government investment or lobbying/hiring government officials), he basically just says "all of that is legal, so we've just got to deal with it and compete with SpaceX anyway."

This struck me as the most important takeaway from Piemont's post:

Without new entrants, the best option to launch a 2-ton satellite to polar LEO today is to use 15% of the capacity of a $60MM+ launch vehicle. So there’s plenty of room for improvement purely through diversification. LEO Rideshare + OMV doesn’t solve this due to the OMV costs which are not substantially lower than small ELV costs.

It raises the question: if there's an opportunity there, why hasn't SpaceX themselves already jumped on it?  Unlike most of the startups, they've already got most of the components developed and in current production at rates that make their cost basically unbeatable, together with a bunch of skilled engineers and of validated models for just about everything needed to get it done quickly and cheaply.  And even with those advantages it apparently doesn't make economic sense to develop and field such a launcher.

So why would it make sense for a startup to try it?

Last Edit: Today at 10:07:00

Currently, these customers use F9. A SpaceX "F3" (or whatever) would cut into their F9 business. No incentive to do this unless someone else is already offering this service. If the customer base is small, it will not justify the development and operations costs of the "F3". The elephant in the room as always is Starship, which is already in the late stages of development. The putative "F3" and its competitors must beat the launch cost of Starship, not the launch cost of F9.

Most of those considerations (the exception being cannibalization of the F9 business) apply to the startups, too.  Even the cannibalization effect might not be too important for SpaceX, since with "F3" the intent would be to sell the same service they already do, but at lower cost to themselves.  The fact that they seem to have determined that any per-launch cost savings would be exceeded by the full-up cost of developing, fielding, and operating the "F3" probably puts a solid upper limit on the value of the "F3" to the overall market, and that value is too low to justify building it.

[TrevorMonty]

Subsidizing rocket companies that wish to be competitors to SpaceX sounds like a good idea on its face.  But that desire to shield them from market discipline is a recipe for failure.  The whole point of a privately held founder controlled company is to operate under market discipline, so we should tread carefully there.

That said, I can think of some basic things that we can do to make their lives easier, like facilitating suitable launch ranges by clearing red tape, or providing some basic infrastructure.  I think that the Space Force learned its lesson with pushing folks to Omelek or Kodiak, but I don't know for sure.

Its in Government's interest to help LV competition by buying some early services even if they aren't cheapest or least risk ride. NASA has history of doing this. F9 and Dragon wouldn't exist without NASA's help,
They gave Astra a change with TROPICs before switching to RL.  Firefly Alpha Victus Nox was high risk mission for Space Force, they could've waited until Alpha had few more successful flights.
RL received funding from DoD in its early pre Electron days.

Both NASA and SS have benefitted greatly from existence of Electron, F9(+Dragon) and FH. I doubt smallsat missions TOPIC and PREFIRE would've ben economical without dedicated small launch. HASTE was unexpected bonus of Electron existence for defense's hypersonics program.

Time will tell how NASA and SS put Alpha to use in future.

Going forward SS will need responsive small launch even more. Being able to quickly deploy a smallsat is one of best ways to deal with hostile satellites. This is what Victus program is all about. Finally air launched Pegasus has mission that it is ideal for.
Air launch allows it to target any lower earth orbit at short notice something LVs using pads can't do.

[RedLineTrain]

Its in Government's interest to help LV competition by buying some early services even if they aren't cheapest or least risk ride. NASA has history of doing this. F9 and Dragon wouldn't exist without NASA's help,
They gave Astra a change with TROPICs before switching to RL.  Firefly Alpha Victus Nox was high risk mission for Space Force, they could've waited until Alpha had few more successful flights.
RL received funding from DoD in its early pre Electron days.

Both NASA and SS have benefitted greatly from existence of Electron, F9(+Dragon) and FH. I doubt smallsat missions TOPIC and PREFIRE would've ben economical without dedicated small launch. HASTE was unexpected bonus of Electron existence for defense's hypersonics program.

Time will tell how NASA and SS put Alpha to use in future.

Going forward SS will need responsive small launch even more. Being able to quickly deploy a smallsat is one of best ways to deal with hostile satellites. This is what Victus program is all about. Finally air launched Pegasus has mission that it is ideal for.
Air launch allows it to target any lower earth orbit at short notice something LVs using pads can't do.

I don't have much problem with what has occurred in the past with respect to the small launchers, at least in the US.  But what I am hearing in this thread and the press suggests that times have changed and a small helping hand is no longer sufficient for survival.

[bstrong]

...
Subsidizing rocket companies that wish to be competitors to SpaceX sounds like a good idea on its face.  But that desire to shield them from market discipline is a recipe for failure.  The whole point of a privately held founder controlled company is to operate under market discipline, so we should tread carefully there.
...

It's not that black and white. You can subsidize them enough to make success one of the possible outcomes without giving them so much help that no discipline is required. The informal roadmap seems to be:

1) Raise private funds to demonstrate basic competency by developing a small launcher and getting it to orbit.

2) The USG will throw you a few launch contracts via various SF/NASA/NRO/DARPA small launch programs as you demonstrate the ability to operate as a launch provider, but not enough to survive without other revenue sources.

3) Compete for a development contract (like Falcon/Dragon got via COTS and Vulcan and New Glenn got via NSSL) to bring a useful launcher to market. This is probably what Beck and Ellis are really lobbying for, now that I think about it.

It's all a little distasteful if you believe in free markets (as I do), but I just don't see a good alternative. And it's a good investment for the USG if we can manage to grow a new crop of aerospace primes to eventually replace Boeing, LM, etc.

[trimeta]

I do wonder about HASTE in particular: if that program ramps up enough, it could produce enough launches and revenue to cover annual fixed costs (personnel, factories, etc.), and so additional Electron launches could basically be sold for little more than the variable costs. That would be one way for the military to ensure the availability of small launch without excessive subsidies or whatever (assuming they could actually take advantage of all those suborbital missions).

[TrevorMonty]

It's all a little distasteful if you believe in free markets (as I do), but I just don't see a good alternative.

Free markets wouldn't have built USA highway network, transcontinental railway or air postal service which gave birth to many airlines.

[Action]

It's all a little distasteful if you believe in free markets (as I do), but I just don't see a good alternative.

Free markets wouldn't have built USA highway network, transcontinental railway or air postal service which gave birth to many airlines.

It shouldn't even be distasteful.  Paying people to enter a market is common in free markets, especially when there's some barrier to entry.

Consider corporate training programs which effectively pay people to enter specialized labor markets, RFPs that let you bill for the work of generating a proposal, aircraft flyoffs like the light-weight fighter competition, etc.

Ongoing subsidy of a non-competitive party is much less desirable.

tl;dr, if there's a cost to enter a market, it's reasonable to ask who should pay that cost.  If the market is a monopsony, oftentimes the customer must pay the cost of entrance for the supplier.  Because it has specialized needs, the government often finds itself in this position.  You can argue the extent to which space markets meet these conditions.  They used to, for the most part, but it's less the case lately.

[Exastro]

It shouldn't even be distasteful.  Paying people to enter a market is common in free markets, especially when there's some barrier to entry.

Consider corporate training programs which effectively pay people to enter specialized labor markets, RFPs that let you bill for the work of generating a proposal, aircraft flyoffs like the light-weight fighter competition, etc.

Ongoing subsidy of a non-competitive party is much less desirable.

tl;dr, if there's a cost to enter a market, it's reasonable to ask who should pay that cost.  If the market is a monopsony, oftentimes the customer must pay the cost of entrance for the supplier.  Because it has specialized needs, the government often finds itself in this position.  You can argue the extent to which space markets meet these conditions.  They used to, for the most part, but it's less the case lately.

This sounds reasonable to me. 

NB: a "monopsony" is a market in which there's only one buyer.  As we all know, that's far from the situation the free-world launch market is in.  The majority of the space business has been commercial for decades now IIUC, but in 2024 I'd guess it's around 10:1 (I'm too lazy to look it up).

The worry is that the fuss about a monopoly (a single seller) in the launch business might cause the USG to subsidize competitors, or hobble the market leader in some other way, in order to redirect a portion of the business.

If the nature of the business is that a high launch rate enables high efficiency, that would necessarily reduce the efficiency of the market leader and prop up its inefficient competitors.  If the subsidies are small and/or temporary, the competitors will likely go under, resulting in a waste of private capital and tax money which could have been invested or spent better on other projects.  Even if some of the favored competitors survive, the effect is to multiply the investment required to achieve the same launch rate, and to reduce the rate of technological progress since much of the development work is duplicative (so less talent is available to work on things other than LV and GSE).

I can't think of a good argument for such a policy.

[Action]

The worry is that the fuss about a monopoly (a single seller) in the launch business might cause the USG to subsidize competitors, or hobble the market leader in some other way, in order to redirect a portion of the business.

If the nature of the business is that a high launch rate enables high efficiency, that would necessarily reduce the efficiency of the market leader and prop up its inefficient competitors.  If the subsidies are small and/or temporary, the competitors will likely go under, resulting in a waste of private capital and tax money which could have been invested or spent better on other projects.  Even if some of the favored competitors survive, the effect is to multiply the investment required to achieve the same launch rate, and to reduce the rate of technological progress since much of the development work is duplicative (so less talent is available to work on things other than LV and GSE).

I can't think of a good argument for such a policy.

This I can't get behind.  If the U.S. government has made one major error in procurement since the end of the Cold War, it's the Clinton-era defense contractor consolidation it encouraged.  Worrying about duplicative engineering is false economy.  Encouraging consolidation in pursuit of efficiency is generally bad economics.  Everybody thinks they can just pick the winners in advance without actually having to run the race...

But I find it extremely hard to believe that a world where SpaceX has 95% launch market share instead of 90% is likely to be a better or more efficient one and can easily believe it makes economic sense to pay a competitor to enter just so there's somebody to bid against them.  I say that with all the love for SpaceX I can muster.  Heck, I bet Elon would agree with me.

What you want to be careful of is that you don't wind up in a situation where you're long-term subsidizing an uncompetitive but politically powerful entity - an Amtrak, NPR, or USPS kind of situation.  Or a ULA kind of situation.

[Stan-1967]

Overall Dan Peimont response was informative & fair, but I find it interesting that his thinking, if taken at face value, has an interesting category error.  From his "X" post:

"...Without new entrants, the best option to launch a 2-ton satellite to polar LEO today is to use 15% of the capacity of a $60MM+ launch vehicle. So there’s plenty of room for improvement purely through diversification. ...."

If his thinking is that he is competing against a $60MM+ launch vehicle for 2 tons to polar LEO, it is understandable he would try making something like ABL work, but fail in the process.   

He is not competing against a $60MM+ vehicle.  He is competing against a vehicle with an amortized cost of somewhere between $15M to $20M.  It is also irrelevant what capacity the competing vehicle is operating at.   Better estimates are out there, but an 80% re-usable F9 should be looked at with an amortized cost for the S1 & fairings,  plus the expendable S2. 

That is the category error, and this logical problem keeps him from seeing that while there is still room for improvement, it is not the gap from an expendable $10M-$15M vehicle to a $60M single use F9.   The gap is re-use.   Relativity, Rocketlab, and others have realized this, and are investing accordingly.

[Exastro]

The worry is that the fuss about a monopoly (a single seller) in the launch business might cause the USG to subsidize competitors, or hobble the market leader in some other way, in order to redirect a portion of the business.

If the nature of the business is that a high launch rate enables high efficiency, that would necessarily reduce the efficiency of the market leader and prop up its inefficient competitors.  If the subsidies are small and/or temporary, the competitors will likely go under, resulting in a waste of private capital and tax money which could have been invested or spent better on other projects.  Even if some of the favored competitors survive, the effect is to multiply the investment required to achieve the same launch rate, and to reduce the rate of technological progress since much of the development work is duplicative (so less talent is available to work on things other than LV and GSE).

I can't think of a good argument for such a policy.

This I can't get behind.  If the U.S. government has made one major error in procurement since the end of the Cold War, it's the Clinton-era defense contractor consolidation it encouraged.  Worrying about duplicative engineering is false economy.  Encouraging consolidation in pursuit of efficiency is generally bad economics.  Everybody thinks they can just pick the winners in advance without actually having to run the race...

But I find it extremely hard to believe that a world where SpaceX has 95% launch market share instead of 90% is likely to be a better or more efficient one and can easily believe it makes economic sense to pay a competitor to enter just so there's somebody to bid against them.  I say that with all the love for SpaceX I can muster.  Heck, I bet Elon would agree with me.

What you want to be careful of is that you don't wind up in a situation where you're long-term subsidizing an uncompetitive but politically powerful entity - an Amtrak, NPR, or USPS kind of situation.  Or a ULA kind of situation.

I agree with most of your first paragraph, but I don't see what it has to do with the LV market in 2024.  The defense market in the U.S. is more or less a monopsony (export sales are significant, but they're tightly regulated by the USG, so maybe it's still a monopsony?)  The FAR and cost-plus contracting are a poor substitute for competition.

The LV market has lots of buyers and perhaps half a dozen active sellers, one of which took a huge risk and came up with a winning combination of concept and execution.  The USG is a minority customer in that market.  They can buy services confident that real competitors exist who will fight for their share of the business, at prices that reflect a real competitive market. 

Nobody here is proposing policies to encourage consolidation among launch providers; at most, people argue for letting market forces work, since the market is real and clearly functioning, even if it's not producing the outcome some would prefer.

Agreed that the USG shouldn't pick a winner.  But it also shouldn't keep the market from picking one.

[thespacecow]

All these discussion about subsidies ignores the fact that the US government is already spending huge amount of money on non-SpaceX launches:
1. $2.5B per year on SLS
2. ~$1B per year on ULA NSSL contract
3. Multiple billions on CRS contracts to Northrop Grumman and Sierra Space
4. $4B+ Commercial Crew contract to Boeing
5. $3B HLS contract to Blue Origin (combined launch + spacecraft development contract, equivalent to COTS)

My guess is the money spent on non-SpaceX launches is at least 2x the money they spent on SpaceX, asking for more subsidies is ridiculous.

[imprezive]

I think one thing to keep in mind is that what’s been holding SpaceX competitors back is lack of execution not anything SpaceX is doing. ULA, Ariane, and Blue all have customer payloads sitting on the ground waiting for them to launch rockets that are years behind schedule. None of those delays have anything to do with lack of funding. Yes the SpaceX market share numbers by launch are eye popping but if SpaceX didn’t exist those payloads would be on the ground waiting for a ride not launching on a different rocket.

[Action]

All these discussion about subsidies ignores the fact that the US government is already spending huge amount of money on non-SpaceX launches:
1. $2.5B per year on SLS
2. ~$1B per year on ULA NSSL contract
3. Multiple billions on CRS contracts to Northrop Grumman and Sierra Space
4. $4B+ Commercial Crew contract to Boeing
5. $3B HLS contract to Blue Origin (combined launch + spacecraft development contract, equivalent to COTS)

My guess is the money spent on non-SpaceX launches is at least 2x the money they spent on SpaceX, asking for more subsidies is ridiculous.

I think one should distinguish between buying services and subsidy.  The Commercial Crew contract with Boeing, for example, might be a disaster, but it's not a subsidy.

Also, if you were to try to promote entry in the small sat launcher market (and I'm not sure you should), it would be crazy to do so by sending money to Boeing, Northrop Grumman, and Blue Origin.

The entities you want to keep afloat in a tough financing environment are the little ones with innovative approaches.

[Jim]

Up thread, there was discussion of the implication that a May 2019 meeting between Elon Musk and Peter Beck sparked SpaceX to offer rideshare missions.

But unmentioned in that narrative is the Spaceflight Industries "SSO-A" mission (Dec. 3, 2018), wherein Soaceflight booked an entire Falcon 9, then sold off opportunities to fly equipment on it. It worked, but was a pain in the neck for SpaceX, as I recall, and SpaceX and Spaceflight had a big falling out, though I believe Spaceflight had originally thought they would launch more of these kinds flights with SpaceX.

Still, when Space later stood up the Transporter missions, I thought we all saw it was because Spacex had seen how well the Spaceflight SSO-A flight sold, and figured they could run the same kind of thing more effectively themselves.

There were some problems that made SpaceX shy away from Spaceflight as an aggregator.

[Jim]

I know this sounds harsh and unreasonable, but Falcon 9 itself is proving to be an extinction-level event, let alone Starship.  Absent Starship, Falcon 9 will be flying 250-300 times in 2026 (the vast majority of which will be packed to the gills).  Nobody had this in their business plans that they used to justify their launch investments.

This made milk come out of my nose.