It is fair to say that Elon Musk has made space exciting again, with the industry dominated prominently by government-based institutions the possibility of a private entity giving outputs as good if not better than a legacy institution. In fact, in a recent interview with Jeff Bezos on the Lex Freidman podcast, he revealed that a primary reason for leaving the position of Amazon as CEO was so that he could focus solely on Blue Origin – an aerospace company that has its vision as “…envisions a time when people can tap into the limitless resources of space and enable the movement of damaging industries into space to preserve Earth, humanity’s blue origin” – he firmly believes that the future of human civilization lies up there.
But these civilizational benefits which have become the talk of the town & will potentially be reaped far in the future. So how come the institutional investors who have an obligation to their clients justify investing in space-based companies and generating revenue-based returns. Essentially how are the space-based companies generating revenue and how the start-ups in these domains propose to generate revenue?
The Space Economy
We are entering a new phase dubbed Space 3.0 — the first phase was governments investing in its exploration, phase 2.0 was billionaires investing in literal moonshots, and now phase 3.0 the commercial viability of space. It’s a lesser-known information as to how these space-based companies as adding value to the existing economic ecosystem. Within the spectrum of space economy, broadly there are two sub-categories i.e. “space-for-earth” and “space-for-space” economy.
The Space-for-Space economy
The space-for-space economy — that is, goods and services produced in space for use in space, such as mining the Moon or asteroids for material with which to construct in-space habitats or supply refueling depots — has struggled to get off the ground. The challenges and application in this category is extremely limited in the current scenario.
The demand for products and services that fit into these categories is very low now and the cost associated very high. Although the concept of space manufacturing has emerged as a viable avenue with the increased rocket and satellite launches. Because there is a restriction on the payload capacity of rockets, essential components for satellites and space equipment can be manufactured in space using 3-D printing technology.
Traditional satellite design is heavily constrained by the limitations of launch vehicles. Any activity of manufacturing liberates these designs, allowing for the assembly of satellites in orbit. This freedom enables more efficient and functional designs, no longer bound by the rigors of terrestrial launch conditions.
But there’s still a long way to go for this to become a commercially viable option since there are numerous challenges and the value proposition is not attractive enough at the current stage of the industry.
The Space-for-earth economy
The space-for-earth economy includes telecommunications and internet infrastructure, earth observation capabilities, national security satellites, and more. This is the economy that most of the companies for such an industry are drooling over.
The centralized government-led programs which still are the dominant players in the industry inevitably focus on space-for-earth activities that are in the public interest, such as national security, basic science, and national pride. The majority of the revenue generated by space-based companies is through contracts with these institutions and other large companies to fulfill their needs.
Pursued Revenue Streams
Revenue streams that space-based companies are building upon are:
- Launch Services: Providing launch services to satellite operators, government agencies, and other organizations. With advancements in technology, the cost of launching into the atmosphere has decreased, making it more accessible for various industries and governments to send their assets beyond Earth’s atmosphere.
- Satellite Deployment and Services: Assisting in designing, building, and launching satellites for various purposes, such as communication, weather monitoring, and scientific research. Additionally, these companies also offer maintenance and repair services for existing satellites, ensuring their longevity and optimal performance.
- Research and Development: Designing and developing cutting-edge technologies, spacecraft, and propulsion systems. By leveraging their expertise and innovative capabilities, private companies in this industry earn substantial income through these contracts, while also contributing to advancements in space exploration.
- Satellite Data and Services: Private space companies can potentially collect vast amounts of data through their satellites, which can be utilized for various applications. They can offer satellite imagery, weather data, and other specialized services to industries such as agriculture, urban planning, and disaster management. By monetizing this data, private space companies can create a sustainable revenue stream while assisting different sectors in making informed decisions.
- Partnerships and Investments: Private space companies often form strategic partnerships with other organizations, including government agencies, research institutions, and even other private companies. These partnerships can involve joint ventures, shared resources, or investments in each other’s projects. By pooling their expertise and resources, these private companies expand their capabilities and generate additional income through these collaborative efforts.
Conclusion
The future of the industry is still uncertain because as the private sector continues to expand its footprint to capture the space economy, new questions keep popping up from time to time with increased capability and possibilities.
Who can mine an asteroid? Who can colonize the moon? Who can advertise in space? Who owns the light waves? Who manages conflict? SpaceX’s recent launch of 60 Starlink satellites may have broadened global internet coverage, but it interferes with scientific data collection (light pollution).
Just a few years back these questions seemed far-fetched to think about, but with the pace that we are advancing, we will need to set the tone for commercialisation sooner than expected.
