Futron estimates the market for commercial earth imaging topped $1B last year (2010).
Uses of Earth Imaging:
- Disaster Relief – think of all of the satellite images you saw after the Japan Earthquake (including the nuclear reactors)
- Disaster avoidance - George Clooney (among others) paying to patrol boarder of north and south Sudan using Earth imaging satellites.
- Helped with hunting down Osama bin Laden (but were any these images from commercial satellites?)
- Food Commodities tracking – allowing traders to ask and answer questions like, “how do the wheat crops in Kansas look after last night’s hail storm?”
- Remote Infrastructure observation – the oil industry uses it to keep track of their assets in remote locations
- Even the US Government is turning to Commercial providers. Last year, the U.S. National Geospatial-Intelligence Agency (NGA) awarded separate 10-year, $3.5 Billion contracts to image providers DigitalGlobe and GeoEye (these contracts are now under review).
The Commercial earth observation markets:
- Market #1: High-Resolution images (1.5 meters per pixel). But the cost of each satellite means providers have a limited number of satellites (usually 1-2) on orbit.
- Market #2: Med-Resolution images (5-7 meters per pixel) – lower quality images, but providers tend to have more satellites in orbit and may offer more spectral bands to choose from for each image and offer more frequent photo opportunities due to the higher number of satellites within the constellation.
In a recent Nov 2010 paper, “6U CubeSat design for Earth observation with 6.5m GSD, five spectral bands and 14Mbps downlink,” author, Dr. Steven Tsitas outlines how a constellation of 6U CubeSats could serve Market #2 (frequent med-res images) competitively. (Sorry, I think you will have to buy the paper. If a reader finds a free version of the paper online, let me know and I will change the link). I hope to post an interview with Steven Tsitas soon.
But why even consider a CubeSat at all for such a mission? Here are just a few of the advantageous of using CubeSats:
- High amount of innovation in the field – from NASA, universities, and private industry
- Low ITAR restrictions (CubeSat programs are thriving in many nations)
- Low mass of each satellite
- Reduced launch cost per satellite
- Reduced cost to replace/upgrade constellation as satellites age, breakdown, or new technology becomes available
Rapid Eye, a German company, is the current leader serving Market #2. Below I will provide some details about Rapid Eye and how a CubeSat constellation might be able to compete with Rapid Eye. First, a little education about Rapid Eye.
Rapid Eye Details:
- Five identical sun-synchronous Earth observation satellites
- Five spectral bands
- Launched in August 2008
- Satellites built by Surrey UK
- 650KM circular orbit
- Captures 4mil km squared of earth’s surface every day
- Once an order is placed for an image, can take a photo of any location on earth (between 75 degrees N and 75 degrees S) within 24 hours.
- Offers not only images, but offers services for the analysis of images – especially good at providing comparative analysis of images taken over a period of time
Rapid Eye, the Numbers:
- Customer price for images: $1.33 per square KM (must purchase 5,000 KM at a time (at current Euro conversation rates that is equal to $6650 per very large image)
- Satellite Constellation construction: $35M
- Expected 2009 Revenue: $29.5M (have not confirmed this number)
- Total Capital needed to break even: $224M
Assumptions about Rapid Eye’s business:
- Assumed Rapid Eye is now profitable
- Assumed the cost of the single Dnepr launch necessary to lift the five Rapid Eye sats: $15M
- Assumed a $50M infrastructure Hardware purchase (ground station and other startup infrastructure)
- Assumed a five year startup at a cost of ~$25M per year in operating (non-HW, non-infrastructure costs)
So what if we could launch a constellation of ten cubesats that could perform a very similar function as Rapid Eye’s current constellation of five small sats? Are their savings if we could? For this post, I will use Steven Tsitas’s conclusions that, yes, such a cubesat constellation would be technically possible.
I will build my business case, not from a technology discussion, but by attempting to answer the business question of - how much could an business save by using Cubesats instead of small sats?
CubeSat Venture Assumptions:
- Cost per 6U CubeSat: $400,000
- Number of CubeSats in constellation: 10
- 6U CubeSat mass: 8 lbs each
- Falcon 1 launch: $9.8M
- SpaceX willing to prorate launch cost based on mass
If we assume the CubeSat venture would operate using the same Hardware and Operating Costs as the Rapid Eye venture, then the CubeSat savings are limited to the cost of the satellites themselves and the cost to launch them into orbit:
- Rapid Eye’s satellite and launch costs: 23% of breakeven costs
- CubeSat venture’s satellite and launch costs: 3% of breakeven costs
But perhaps competing toe-to-toe with Rapid Eye is the wrong business model. As a general rule, it is hard to out Wal-Mart, Wal-Mart. What-if the CubeSat earth imaging venture could, instead, become the low-price, no frills, earth imaging provider?
In the earlier example, the CubeSat advantage was limited to lower satellite costs and cheaper rides to orbit on SpaceX launch vehicles. But what-if the venture could also save money on ground costs: Hardware/ground stations and operating expenses?
CubeSats, the low-cost leader in earth imaging Assumptions:
- Continue with assumptions regarding low satellite costs
- Continue with assumptions regarding low launch costs
- Lower ground Hardware and Infrastructure costs from $50M to $25M
- Lower operating costs from $25M to $10M per year.
Here is a quick cost comparison between the options:
Next Questions (beyond the scope of this post):
- Market price elasticity: How price sensitive is the earth imaging market? How would cutting Rapid Eye’s price by 20-60% affect demand for a CubeSat-based image product?
- What realistic cost reduction methods are possible in ground hardware and personnel?
- Admittedly, my Rapid Eye information was limited to publicly available data, a more serious effort should be conducted to understand the competitor’s cost structures and current profit forecasts
- What are the cost implications from using a CubeSat-based system? Where are system costs reduced? Where are system costs increased?
- Admittedly, images from a CubeSat are of a lower quality than the best in orbit (5-7 meters per pixel compared to 1.5 meters per pixel from the industry leaders of market #1). How sensitive is the market to image quality? And what can be done to increase the quality of an image taken on a 6U CubeSat?
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