U.S. Rocket Launch Market: Strictly Commercial?

A few Ill-Defined Space announcements to get through.

First, the email function of the site will be changing at the beginning of 2021. While I’ll still be posting to Illdefined.space, I’ll be using a separate service, Substack, for sending out the emails, which means they will come from Illdefinedspace@substack.com. I believe the Substack versions will be superior for subscribers, as they contain the analysis rather than linking to it. So, less clicks for subscribers. But this does mean the analyses are in two locations: Illdefined.space and illdefinedspace.substack.com.

Second, the frequency of my analyses will be changing around mid-January--there will be less. I’m starting with some university courses for a master’s degree. Taking classes means I may not be able to write as often as I have about the commercial space industry. Frankly, the site isn’t the money-generator I was hoping it would be, so there will be minimal impacts on paying subscribers. I will be refunding money to those subscribers, but they will still get content--just not at a predetermined frequency. Whatever I learn, I hope to apply to my analyses here.

Third, I will be taking next week off...unless I feel like there’s something worth looking at.

On to the analysis.

Records are Meant to be Broken

Looking at the world’s orbital launch attempts, if we include a few that should launch by the end of this year, 2020 doesn’t look terrible. Total attempts come to 111, a few launches shy of 2018’s total of 114. And 2018 was the highest number of the world’s launch attempts after nearly 30 years. That some nations ramped back launches during the year in response to the pandemic is not surprising. Despite the global pandemic, the number of launch attempts conducted in 2020 nearly equaled 2018s. That is unexpected.

The missions that drove most of the launches in the late 1980s were for military purposes--not surprising considering the U.S./USSR rivalry. In 2018, civil missions (ISS, exploration, etc.) took nearly 50% of the world’s share of attempted launches. By the end of this month and year, most of the world’s launch attempts were again for civil missions. They took the majority--just--with ~38%. Commercial launch attempt share was a percentage point behind at ~37%. While these shares indicate that civil missions still dominate launch efforts globally, the growing share of commercial launches may exhibit a slow march towards a commercial launch marketplace.

The launch numbers don’t show the mission distributions for spacecraft deployments, which added up to ~1,235 satellites for 2020. Note that this is a record, but it will probably be beaten in 2021 when SpaceX and OneWeb deploy significant satellite numbers. Over 1,000 of 2020s spacecraft (~81%) were for commercial missions--depending on who you ask. Overall, the U.S. launch service providers were the busiest, as U.S. launch attempts ended the year at 43. China will come in with 37-38 launch attempts. Russian launch service providers will end up around 13-14 launches.

With those quick facts out of the way, the rest of this analysis will focus on U.S. activities and the U.S. launch market. Why?

Because that nation’s launch providers attempted to launch the greatest global share of rockets (~38%) and deployed the highest number of satellites during 2020 (~70%). There’s also some silliness involving how people “count” commercial payloads that should be addressed (because the internet makes it too easy to pass that silliness on).

R-O-C-K(-E-T) in the USA

Probably unsurprisingly for readers, SpaceX conducted the majority of U.S. launches (25). What may surprise folks is that there were seven Rocket Lab launches, beating out ULA. Surprising, because 1) the pandemic, and 2) the company experienced a launch failure mid-year. And yet, the company still was the second-busiest launch service provider in the U.S.

Twenty-five launches is a SpaceX record, but far shy of the 70 launches it would like to conduct from Florida alone. Like Rocket Lab, it achieved that record during a pandemic. It also managed two other firsts: 1) launching a test crew capsule with humans aboard to the International Space Station, and 2) launch a certified capsule with humans to the ISS.

Of SpaceX’s 2020 launches, 15 were loaded with commercial payloads. This term, commercial, is where some people downplay SpaceX’s overall launch feats because just one of those commercial launches was dedicated to an external customer. SpaceX launched the remaining 14 commercial launches for deploying its commercial LEO broadband Starlink satellites (three of those launches included Rideshare customers). So, let’s see, one external commercial mission, plus 14 internal commercial missions, equals...15 commercial missions.

But some people are hesitant about accepting SpaceX’s Starlink-dedicated launches as commercial, questioning Starlink’s profit potential. To be clear, SpaceX doesn’t care if a Sirius-XM satellite has profit-potential (FYI--the company seems to be okay), only that SXM is paying for SpaceX’s launch services. Ditto for the civil and military payloads that SpaceX launches--no one is concerned about revenues generated from those customers’ spacecraft.

Starlink also appears to fit the recent U.S. National Space Policy’s definition for a commercial business:

The term "commercial," for the purposes of this policy, refers to goods, services, or activities provided by private sector enterprises that bear a reasonable portion of the investment risk and responsibility for the activity, operate in accordance with typical market-based incentives for controlling cost and optimizing return on investment, and have the legal capacity to offer those goods or services to existing or potential non-governmental customers.

SpaceX and its investors are bearing a lot of Starlink’s investment risk. Perhaps people have problems with the company’s incentives, which are market-based but have failed to work for others in the past. At any rate, the company’s Starlink effort meets the NSP’s definition of commercial, which means SpaceX’s Starlink launches are commercial.

The issue for some critics could be that even though SpaceX was launching a lot, there just were not very many external commercial customers for its services this year. And the thought is that Starlink launches are at cost for SpaceX. But it makes sense for the company to take advantage of its low launch costs, doesn’t it? While SpaceX is not immediately making money from launching Starlink, that doesn’t mean Starlink isn’t commercial. And the company certainly anticipates making profits from Starlink (as any business hopes to do).

Not Yet A Commercial U.S. Launch Market

SpaceX isn’t the only launch service provider facing an external commercial customer shortage in 2020. Northrop Grumman and ULA launched only military or civil missions, which SpaceX also launched. Of the U.S. launch service providers, only Rocket Lab managed to snare more commercial missions than SpaceX. Compare this external commercial company ratio with Europe’s Arianespace. Six of the company’s nine launch attempts in 2020 had commercial payloads--and Arianespace actually stopped launches for a while because of the pandemic.

Part of Arianespace’s attraction for these commercial companies, I suspect, are lower launch prices through government business subsidies. Part of it is also the partnerships the European company has built up with those companies over the decades. However, the largest reason for Arianespace’s commercial attraction is that it is catering to those companies without dealing with a military and government legacy of support and security concerns. In other words, the European launch service marketplace is more open than the U.S. even though just one company is providing launch services.

What we might be seeing, then, is a commercial launch market problem...there doesn’t appear to be a healthy one in the United States...yet. Two of the three U.S. large rocket launch services are dependent on government-sponsored missions. SpaceX isn’t dependent (although it gladly takes government money when the opportunity arises) but appears to be a victim of its success. While the company moved quickly to market with an inexpensive and reusable launch vehicle, the potential commercial customers--especially in the U.S.--weren’t able to move as quickly. Some are unwilling to move quickly.

U.S. satellite manufacturing companies like Ball, Boeing, or Lockheed Martin design and build satellites in years. One of their biggest and most profitable customers, the U.S. government, appears very comfortable with that pace (and ULA and NG are happy to accommodate). Their commercial customers are also satisfied with the slow pacing, but whether this is because of low schedule expectations is unclear. This situation makes it pretty clear not to expect shifts to lower-cost and faster satellite manufacturing from the legacy companies, even though their interests are served in catering to a larger commercial market.

Very few established companies are willing to change their culture and processes like that.

However, new satellite manufacturers will eventually leap in and take advantage of the slow movers, opening the satellite market to more potential customers. They already are doing so, in the form of cubesat/smallsat manufacturers and satellite operators who also build their satellites in-house. Some are even manufacturing slightly bigger smallsats, possibly in response to SpaceX’s low cost per kilogram rideshare pricing. SpaceX can manufacture more satellites in a month than some legacy companies do in two-three years. Ultimately, it will take some time for the advantages offered by SpaceX’s Falcon 9 to trickle down.

SpaceX may exacerbate this problem when its Starship launch system comes online. One primary reason for the existence of smallsats is because launch costs were expensive. It’s not as bad today, but what happens when costs possibly get as low as $50 per kilogram? How will manufacturers respond? How will other launch service providers respond? Will that pricing attract new customers, who would have never considered launching a satellite before?

It could be a commercial launch market that is healthy and diverse and grows in response to these low prices. It just won’t respond as fast as SpaceX would like.

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