Space is the ultimate frontier for business, and the evolution of the space economy suggests that a new commercial space age is taking shape. Technological advances are redefining the economics of space. Lower economic barriers and favorable regulation can unlock great opportunities for businesses in a host of industries. In this article, we take you through a journey exploring business opportunities and developments in space travel.
The Space Economy Records Steady Growth
The Space Foundation reported that, in 2019, the global space economy grew by 2.2% over the previous year, reaching $423.8 billion in value. The growth was primarily driven by commercial activities, which reached $336.89 billion in revenues, up 6.3% from $328.86 billion in 2018. In fact, spacecraft on commercial missions increased by 48%, from 170 in 2018 to 251 in 2019. The commercial infrastructure and support industry segment recorded a remarkable 16.1% increase, growing from $102.66 billion in 2018 to $119.17 billion in 2019.
Additionally, the report indicated that the growth of the space economy was reflected on employment. In 2019, the European space workforce consisted of about 47,895 people, recording a 6.2% increase from 2018. The US also recorded a positive growth in the space workforce, yet weaker with a mere 2% workforce gain from 2018 to 2019.
Over the next decades, the growth of the space economy is expected to accelerate as new technologies are developed and space becomes more accessible.
Zoom-In 1: The Space Economy Is a Satellite Economy
Currently, the satellite industry dominates the space economy: the two almost overlap. This year, the Satellite Industry Association reported that the satellite industry accounted for 74% of the entire space economy, with global revenues amounting to $271 billion. In detail, the Ground Equipment and Satellite Services were by far the main sub-industries, accounting for 48% and 45% of total revenues, respectively.
Satellites are crucial for both civilian and military use, for application like remote sensing, telecommunications, meteorology, positioning and navigation. Moreover, the ever-growing demand for such satellite services has fostered the growth of the satellite industry. In fact, between 2014 and 2018 over 850 satellites were launched, a 243% increase over the previous five years. In April 2020, the Union of Concerned Scientists (UCS) reported a total number of operating satellites equal to 2,787 and this number is expected to exponentially increase as the demand for data surges due to the development of AI, IoT, self-driving vehicles and virtual reality.
Zoom-In 2: The Impact of Covid-19 on the Space Economy
The pandemic has caused delays in launch schedules, the halt of many satellite production lines and depleted private financing, which in turn have jeopardised the sustainability and viability of emerging space companies. Yet, the Space Foundation reported that, in the first three quarters of 2020, the number of rocket launches has been stable and the space economy has maintained its momentum despite the Covid-19 pandemic. Although the 41 successful launches in the first six months of 2020 were slightly below the five-year average of successful launches (equal to 43.2), these were on par with previous years.
Some optimism comes from the current switch of many businesses to remote operations and from the increasing demand for data and information. Space companies remain very attractive, given the potential strong growth for their data and analytics services. Space Capital recently reported that many of the space companies in its portfolio experienced a surge in demand during 2020, suggesting that space companies could play an increasingly central role in the post-pandemic world.
Technology Improves the Economics of Space
The technological advancements and increased launching efficiency are likely to enable the rise of commercial space travel. For decades, the extremely high costs of launching to space represented a significant barrier to the development of the space economy. Today, however, innovation is redefining the economics of space, making it increasingly accessible. SpaceX, the company that has disrupted the launch industry, dramatically cut costs, by bringing the cost to launch a satellite from $200 million to about $60 million. The company did so by exploiting scale economies and high launch rates and by leveraging a major technological breakthrough: reusable rockets. Going against the industry’s established beliefs, SpaceX invested over $1 billion in reusable launch technologies and now its Falcon 9 is the world’s first reusable rocket. Reusability allows SpaceX to refly the most expensive parts of the rocket, which in turn drives down the cost of space access, potentially marking a turning point for the whole space economy.
In August 2020, Elon Musk, CEO of SpaceX, explained the finances behind reusing rockets. He claimed a Falcon 9 with a configuration for the reusability of booster and fairing has payload capacity that is about 60% of that of Falcon 9s with a standard configuration, while the cost of recovery and refurbishment represents less than 10% of the initial production cost. Therefore, Musk argued that the breakeven point would be achieved in just 3 flights. Early estimates report that Falcon Heavy’s launch costs could be cut by an additional 30%, thanks to reusable rockets.
Private Investments in Space Companies
In recent years, massive private capital has flooded space-related companies and startups. Space Capital reported that, from 2009 to the third quarter of 2020, 1128 space companies received cumulative private equity investments of $166.1 billion and, in just the first three quarters, 2020 has been the largest year on record for space infrastructure investment, with $5.5B invested YTD, driven by large venture capital and individual investments in launch companies.
Main Industries of the Commercial Space
OneWeb was the first to propose a mega-constellation to deliver internet to remote parts of the world, but in March 2020, after failing to secure additional funding, it had to file for Chapter 11 bankruptcy protection. In mid-November, OneWeb was able to emerge from Chapter 11 by selling 84.4% of the company for $1 billion to the UK government, which will have a golden share, and Bharti Global. The two join investors such as SoftBank, Airbus, and Virgin Group’s Richard Branson.
The company’s goal is to launch 650 satellites to offer a global commercial internet service by 2022 targeting enterprise customers. But, as of November 2020, the company lags behind Starlink having only 74 satellites in orbit. SpaceX’s satellite internet service, Starlink, is in a leading position in the new business of satellite internet, with 895 functional satellites in orbit ready to provide internet service in most areas of North America. The constellation is growing at a pace of 120 satellites a month, aiming to reach about 1,200 satellites for global coverage. Further, SpaceX is going to offer a public beta version of its emerging Starlink high-speed internet service to 700,000 users for $99 a month plus a $499 upfront fee for an installation kit. Forbes projects that by 2025 Starlink will have annual revenues of about $10 billion. However, the competition will get fierce even for starlink with the launch of Amazon’s “Project Kuiper”, a constellation of 3,236 internet satellites for a $10 billion investment.
According to a report by UBS, published in March 2019, space tourism could have a potential market value of $3 billion by 2030. For two decades, the only space tourism company was Space Adventures, which took seven tourists to the International Space Station, using Russian Soyuz rockets. The tourists spent about a week on board of the ISS paying a price of more than $20 million each.
Today, however, suborbital travel seems very promising, as commercial space ventures such as Virgin Galactic and Blue Origin are getting ready to launch tourists. Virgin Galactic aims to launch its SpaceShipTwo vehicle from the Spaceport America in New Mexico and take six passengers up to 13,700 km above ground. The company has already sold tickets to about 600 passengers at a price between $200,000 to $250,000. Blue Origin also conducted suborbital test flights with its reusable New Shepard rocket, but it did not disclose any ticket price yet. In the same report, UBS claimed that suborbital travel is the space tourism business with the greatest potential to gain traction quickly, given that about 37 million people could become paying passengers, having a net worth between $1 million and $5 million.
SpaceX is planning to enter the space tourism business too, but sending tourists beyond Earth’s orbit. In September 2018, Musk announced Japanese billionaire Yusaku Maezawa signed with SpaceX to fly around the moon on Starship in 2023. Maezawa’s financial commitment was not disclosed but he bought all the seats and he will bring six to eight guest artists with him to the Moon. Instead, Space Perspective aims at taking its customers rides to the Stratosphere (30,000 meters above ground) for a price of about $125,000, using innovative hot-air balloons. The company vehicle, “Spaceship Neptune”, is an 8-person pressurized capsule carried by a 200-meter-tall hydrogen-filled balloon. Each seat will likely be very expensive.
To pursue long-lasting missions and reduce dependence on Earth, in-space manufacturing is critical. Companies like Made in Space are adapting disruptive terrestrial technologies to the space environment. Recently, the company succeeded in manufacturing a ceramic part on board of the ISS for the first time, a great achievement given that ceramic parts are essential for making industrial products such as turbines and engines. Made in Space is also building a satellite that can 3D print itself in space.
In-space manufacturing provides great benefits also for terrestrial business, since the unique properties of microgravity lead to superior materials’ properties. For example, ﬂuoride optical ﬁbers can reduce signal loss by a factor of 100 compared with traditional silica optical ﬁbers. But imperfections occurring during the manufacturing on Earth prevent the achievement of such signal loss reduction. Interestingly, microgravity can minimize such imperfections and made-in-space fluoride optical ﬁbers could dramatically reduce the cost and increase the efﬁciency of communications systems.
Space resources can be extracted from asteroids and the Moon. In 2017, Goldman Sachs argued that asteroid mining is more realistic than perceived, with costs comparable to traditional mining. The Government of Luxembourg also believes in space mining and it aims to become the European hub for space resources. To this end, it created the $227 million Space Resources initiative and, in partnership with ESA, opened the European Space Resources Innovation Centre. Mining is fundamental to future space exploration, since ice deposits on the Moon must be mined to provide water to future crewed lunar outposts. Thus, space mining will first focus on water and water-derived propellants to fuel space vehicles. Then, mining companies will begin sourcing structural metals for construction, rare chemicals and precious metals needed for in-space manufacturing and for return to Earth. For example, the lunar surface contains large amounts of the rare isotope helium-3, scientists and engineers have suggested that it could be extracted and transported to Earth for use in nuclear fusion reactors.
Satellite Internet dominates 2040 Space Economy
Morgan Stanley estimates that the global space industry could generate revenues of $1.1 trillion by 2040, up from $350 billion currently. Yet, the most significant opportunities may come from satellite Internet, which will represent 50% of the projected growth, as much as 70% in the most bullish scenario.
Regulation adjusts to the Commercial Space Age
The development of Commercial Space entails significant policy and legal challenges.
For decades, the 1967 Outer Space Treaty (OST) has been the cornerstone of space regulation. But today it is considered to be greatly controversial, as it states, in Article II, that “Outer space, including the moon and other celestial bodies, is not subject to national appropriation by claim of sovereignty, by means of use or occupation, or by any other means”. The 1979 Moon Agreement reinforced this principle by providing that the Moon and its natural resources are the common heritage of mankind and that an international regime should be established to govern the utilization of such resources, when it becomes feasible. As exploitation is now viable, the time has come to establish an international regime to clarify property rights of space resources and to let investors, companies and their customers commit significant resources to long-term space projects.
In 2015, the U.S. took the initiative and addressed the issue by passing the Commercial Space Launch Competitiveness Act (CSLCA). The CSLCA affirms “a United States citizen engaged in commercial recovery of an asteroid resource or a space resource under this chapter shall be entitled to any asteroid resource or space resource obtained, including to possess, own, transport, use, and sell the asteroid resource or space resource obtained in accordance with applicable law, including the international obligations of the United States”. In 2017, Luxembourg followed the US by adopting a new law to create property rights on planets and asteroids and govern exploration and use of space resources.
In October 2020, at the International Astronautical Congress, officials from Australia, Canada, Italy, Japan, Luxembourg, the UAE, the UK and the US formally signed the Artemis Accords. Besides the general principles, the Accords state that the extraction of space resources does not inherently constitute national appropriation under Article II of the OST and that extraction and use of space resources should comply with the OST and in support of safe and sustainable space activities.
Although Jim Bridenstine, the NASA administrator, stressed that the Accords are intended to operationalize the OST, it is evident that they provide a convenient interpretation of the OST, and that the US are pushing for establishing an international regime that recognises property rights of space resources. All the other countries are likely to follow the US lead and join the new space gold rush.