NLV Market Analysis

NLV Market Analysis

Sepatuads.com   Maret 06, 2011   Comment  

Garvey's Prospector 7C

In October of 2004, I attended the Space Frontier Foundation’s conference in Southern California on the Queen Mary. There, Masten Space Systems made a big splash announcing it was joining Armadillo Aerospace in developing Suborbital RLV’s.

I remember thinking at the time, how did Masten have enough market data to make that decision? Masten, Armadillo, XCOR, Virgin, Blue Origin – these guys & gals threw their hat in the ring long before there were significant studies confirming suborbital RLV’s made “market sense”. They had vision. They had guts. Or if the data did exist, at the time, I did not know how to find it.

And now, NASA is offering a prize for a Nano-satellite Launch Vehicle (NLV) – “launching very small things quite often”. And as candidate NLV teams consider throwing their hats in this ring, the market data is a little more available for an NLV service than there was for suborbital service almost a decade ago.

This post attempts to consolidate that NLV market analysis. Of course this will be incomplete, so I need your help. Add links to other NLV market data in the comments of this post to benefit the whole group. I will skip a discussion of NASA's NLV Challenge.  Here is NASA's NLV Challenge Page  for more details. 
I have broken the NLV market analysis down into the following categories:

• NLV Market Sources
• Market Overview
• NLV Market Differentiators 
• NLV Substitutes
• Interesting NLV Market Nuggets
• Potential Market Competitors
• Market Demand Graph
• NLV Pricing Discussion
• Market Impactors

NLV Market Sources.  The authors of these study deserve your business. Buy their papers. They are doing good work. Instead of at the end of this post, I wanted these links near the top!

• Foust, J. 2010. “Emerging Opportunities for Low-Cost Small Satellites in Civil and Commercial Space”
• Foust, J. 2008. “If you Build It, Who will Come? Identifying Markets for Low-Cost Small Satellites”
• Christensen, I, et al. 2010. “Market Characterization: Launch of Very-Small and Nano Sized Payloads Enabled By New Launch Vehicles.” This link will give you the first few pages, have to buy the full version.

Market Overview.  The NLV market can be dissected in at least two ways: (1) by payload size and (2) by payload type.

Payload Size. I have heard various naming conventions for small payload launch vehicles.  For this blog post, I will use “Nano”, “Micro”, “Small” as three payload sizes to consider.  However, I will group them all together and use the name NLV most of the time.

• Nano - Under 10kg
• Micro - 10-100 kg
• Small - 100-200 kg

NASA is focused on a 1kg payload for its NLV Challenge. The Army is interested in at least 20kg payloads. Even if first generation vehicles are only able to launch a few kg of payload, commercial NLV ventures would be wise to endeavor to grow to larger payload sizes over time. Current 200-400kg payloads launched currently on larger vehicles would surely be interested in "going on a diet" if an NLV launcher could carry 100-200Kg yet offer more frequent launches.

Payload Type. The second NLV market subdivision will be the option of (1) launching a functioning satellite or (2) delivering cargo to stations or depots. Of the two, cargo delivery may very well be the larger of the two sub-markets. It will take far less preparation to send the ISS an NLV-load of fresh apples than it would be to fund, develop, integrate, and launch a nanosat. Both satellite launches and cargo delivery will be sub-markets. Expect the satellite market to retain a diversified customer base. Expect the cargo delivery customer base to be dominated by station owners in the early days (ISS partners and Bigelow), but to expand to Space Station customers in the not so distant future (see: NanoRacks).

NLV Market Differentiators.  What makes an NLV unique? An NLV won’t be able to carry as much payload to orbit as its bigger cousins, why would any customers want to use an NLV?  Answer: Frequent launches, low integration time.

• Cost: Higher Cost per LB than larger launchers but lower Cost per launch
• Launch Frequency: Launch *much* more frequently than larger launchers (weekly? Daily?)
• Launch Lead Time: Integrate payloads in less time to take advantage of more frequent launches
• Payload Mass: a few kg (at first)
• Orbit Choice: Customers can choose since not a secondary payload
• Suborbit/LEO/GEO: Limited to LEO (at first) – Suborbital applications? Maybe.

NLV Substitutes.  Prices for NLV’s cannot be set independent of substitutes. Here’s a list of some big ones:

• Launch as secondary payload. Spaceflight Services (Andrews Space) offers a turnkey solution for your payload to fly on the BIG rockets as a secondary payload.
• Hosted payloads. Boeing just launched a new service to combine your payload with others on a single satellite bus thus reducing customer costs since they do not need to procure an entire satellite. Note: this would be a substitute only for satellite payloads, not for cargo payloads
• Commercial RLV suborbital spaceflight. Masten, Armadillo, and Blue Origin are stuck at 100km for now, but not for long. Watch as future generations of their vehicles climb higher and higher giving customers a greater flight-time, frequent launches, and very low costs.
• With COTS deliveries to ISS approaching, deliveries to station will be made by NASA several times per year with ISS partners also delivering cargo to station several times per year.

Interesting NLV Market Nuggets.

• Microcosm Inc, identified potential market-wide launch savings of more than $15B over a 12-year period, resulting from the development of a low-cost responsive launch vehicle focused on the SmallSat market (above 100Kg)
• In a 2008 presentation, Pete Worden said there were ~80 universities with active cubesat (nanosat) programs 
• A 2006 Futron Study identified over 30 markets in 6 principle areas for services provided by low-cost satellites in the 100-200 kilogram class
• The US Army is interested in Nano Launch and had put a price point of $1M per launch.
• My interview with the CEO of CubeSat component manufacturer Clyde Space revealed he thought $250K for a 3u is definitely too much for most customers.
• My interview with Professor Jordi Puig-Suari from Cal Poly and professors from MIT, and St. Louis University who are currently active in either university satellite development or active in space research of some kind show they are targeting a price point under $50K per CubeSat with $20K being preferred. Relooking at my notes from those interviews, at a $20K price point, these professors thought the US demand for CubeSat launches would grow to 50-100 each year. Interesting they thought the low flight opps of the current “secondary payload” system a bigger problem than the high cost. Prof Michael Swartwout said in my interview with him, he waits 5-7 years to secure a spot on a rocket to launch his CubeSats. This is longer than an undergrads college career – not too inspiring for young engineers!

Potential Market Competitors.  Non-exhaustive – From the Paper: "Market Characterization: Launch of Very-Small and Nano Sized Payloads" by Christsensen, et all. 2010.

Market Demand Graph:

This graph is incomplete but should convey the significant number of different areas where an NLV could gain market share. For an explanation of these categories I would encourage you to get a copy of the wonderful papers I list under the “sources” section of this post.

NLV Pricing Discussion.  A major portion of any market analysis is not just what the needs are but what are potential customers willing to pay to meet those needs. For the NLV market you have customers at different ends of a spectrum. Government customers like the Army have stated a willingness to pay $1M to place 20kg in LEO. Universities want to keep Cubesat costs (usually 1-3 kg) to under $20K per U.

Variable Pricing seems like the right answer, where Primary customers pay a premium to fly on their schedule to their orbit and others willing to fly “standby” get a much reduced price but operate on someone else’s schedule and flies to someone else’s orbit. Rather than rewrite the variable pricing details now, here is the post I wrote on variable NLV pricing a few months ago.

If you made me guess right now, I would assume the following prices per U would be acceptable by the market:

• Government: $50-200K per U (with discounts per U for larger payloads)
• Academia: $20K per U
• Commercial: ???, perhaps somewhere between

Market Impactors.  Any market has externalities to the market that can help or hurt the industry. Here are just a few:

• Of all of the substitutes available to the NLV market, the one that has most potential to steal market share is the second or third generation of suborbital RLV’s. As mentioned earlier in this post, a subset of the NLV market could be served with the extended micro-gravity offered by suborbital RLV’s flying to 500 or 1000 km. But the opposite is also true, a delay or accident affecting the un-manned portion of the suborbital RLV industry (primarily Masten, Armadillo, and Blue Origin) could make some customers consider launching on an NLV rather than waiting for the suborbital ride. 
• One of the two key sub-markets for NLV’s will be package delivery. More successful space stations, more package delivery. The proliferation of commercial space stations will be a major driver of this sub-market
• How the last mile problem gets solved will directly affect the viability of micro package delivery (one of my two submarkets). We need solutions for the last mile problem – the solution will be part technology, part policy, part management. If NLV packages can’t be routinely delivered to space stations, the NLV industry will be severely hampered and space stations will miss out on an enabling method to gain just-in-time deliveries.
• NLV’s only work as a market if they can launch frequently with low integration turnarounds. Even if low costs had to come later, the ability to launch frequently with streamlined payload integration will be the driving force behind early NLV success stories. The question operators will need to ask is, “How do I design and manage NLV operations in such a way to achieve the goals of frequent flight opps and low integration turnarounds?”
• Although depot development is still years down the road, the potential “match made in heaven” between depots need for frequent propellant deliveries and NLV’s ability to fly frequently should not be overlooked…but I would not build a business plan around depot assumptions just yet.

That is a good dataset to start.  I will add some commentary in future posts.  Here is the spreadsheet containing the tables used in this post. 

Now I welcome your additions.  Use the comments section to your links to even more NLV market data.

Variable Pricing for a NanoSat Launcher

Variable Pricing for a NanoSat Launcher

Sepatuads.com   Desember 04, 2010   Comment  

From a recent post about NanoSat Launch Vehicles, a commenter asked some good questions about NLV pricing.

Paraphrasing and summarizing, he asks how a NanoSat Launch Vehicle operator could achieve a low price point ($500-$1M) while still making the price attractive to universities which are often funded from small $10-20K grants. He also asks about how in this same post, I derive a desired NLV price point from between $500K and $1M. My response is below.

I believe the following business model could be effective at both increasing demand for a NanoSat Launcher and earning significant revenue for each flight. The model can be summed up in two themes:

1. Offer frequent, well-published launch opportunities
2. Provide variable pricing

Frequent, well-published launch opportunities increase demand by giving customers the ability to fly as often as they desire. Variable pricing charges your customers what they are willing/able to pay while still giving you, the launch operator, a business model capable of making money long-term.

Without frequent, well-published launch opportunities and variable pricing, your capacity to launch will dwarf the current demand making long-term profitability illusory.

Launch monthly (weekly if you can) per a schedule posted online. Regulations will probably limit your flight rate more than your technical solution, so focus resources on minimizing regulatory delays. I envision online payload reservation for customer convenience with orbit targets for each launch clearly posted. Sub-divide your cargo space into 1kg/1u modules (1u= one 10cm cubed space. This is CubeSat language). Sell Three products to your customers:

• Standby Payloads are priced low enough to attract University customers but such "standby" payloads may get bumped from a particular flight if a customer willing to pay “guaranteed” rates is available. University customers on standby will not be choosing the orbit in which their CubeSat is deposited, but since most of these payloads are for education purposes, the loss of orbit selection is more than offset by the combination of frequent launch opportunities and ridiculously low cost. 
• Guaranteed Payloads are priced at a premium attracting customers willing to pay for the frequent on-time flight opportunities. 
• Allow one customer per flight to choose the orbit (altitude/inclination) for a price. I would assume that the first customer reserving Guaranteed Payload Space on a given launch would also secure the orbit that best met the need of their payload.

$1.5M per flight.  If the launcher’s payload bays were full, the revenue per flight might look like this (arbitrary pricing):

$1.1M per flight.  If the launcher’s payload bays were less than full, revenue could still be more than $1M per flight (again arbitrary pricing values). Payloads are only at 60% in the example below:

$515K per flight.  Depending on the cost structure of the NanoSat Launch provider, they could even launch a single 3u P-Pod for about $550K. Would some customer’s find value at that price if they launched when they wanted, to the orbit they wanted? Under such circumstances, you may consider filling your unused payload space with non-paying education payloads.

The commenter also wanted to know why I thought $500K-$1M price point makes sense for single 20kg payload? As we have seen above, through innovative pricing, aggregate price points per launch could be considerably higher while still offering bargains to the universities to help keep your manifest full. But below was my logic for why I thought $500K to $1M was a safe range:

1. The US Army is interested in Nano Launch and had put a price point of $1M per launch.
2. My interview with the CEO of CubeSat component manufacturer Clyde Space revealed he thought $250K for a 3u is definitely too much for most customers.
3. My interview with Professor Jordi Puig-Suari from Cal Poly and professors from MIT, and St. Louis University who are currently active in either university satellite development or active in space research of some kind show they are targeting a price point under $50K per CubeSat with $20K being preferred.  Relooking at my notes from those interviews, at a $20K price point, these professors thought the US demand for CubeSat launches would grow to 50-100 each year. Interesting they thought the low flight opps of the current “secondary payload” system a bigger problem than the high cost. Prof Michael Swartwout said in my interview with him, he waits 5-7 years to secure a spot on a rocket to launch his CubeSats. This is longer than an undergrads college career – not too inspiring for young engineers!
4. $500K price point would cover launching 20 CubeSats at $25K each (even if you were not swayed by my variable pricing strategy).
5. $1M price point would represent the Army’s desire for a nano launch capability that I mentioned under #1

Demand for a Nano-Launcher?

Demand for a Nano-Launcher?

Sepatuads.com   Juni 26, 2010   Comment  

After my interview with Craig Clark of Clyde Space, we continued our dialogue.  Here is one market demand question, you may find interesting:

Q. Being a business blog, I am always interest in market demand. The US Army’s SMDC Nano-Launch Vehicle program agreed to pay $1M per launch for a responsive 20-kg LEO capability. Using this price point, based on your experience, what annual demand do you see for such a capability should a dedicated nano-launcher become available?
 
Craig Clark: For the $1m launch vehicle. I’d love to see that happen. I think that whoever develops that system needs to aim to carry a 50kg payload into orbit, otherwise the cost is still too high ($250k per 3U CubeSat is too much). My main concern is price creep. SpaceX wanted to provide a $1m small satellite launch vehicle, this quickly turned into a $4m vehicle and now it is about $10m per launch. I am really interested to see how Virgin Galactic get on with their plans to air-launch small satellites using the White Knight 2 – this could be the way forward for small sats.   In terms of demand, we will need this type of launch vehicle in order to place nanosatellites in the complimentary orbits required for constellations, so demand will be high IMO. It’s difficult to say exactly, but I wouldn’t be surprised if we are looking at multiple launches per month, especially if the business model is correct (i.e. no launch campaign, standardization, etc.).

Clyde Space: E-Commerce for Satellites

Clyde Space: E-Commerce for Satellites

Sepatuads.com   Juni 08, 2010   Comment  

Below is an interview with Craig Clark, founder and CEO of Clyde Space, cubesat component provider based in Glasgow, Scottland.  Clyde Space is leveraging e-commerce to design and sell the next generation of spacecraft.

Q. Tell us little about your background.

Craig Clark: Quite an ordinary background really. I grew up in central Scotland, left school when I was 16 and went to the University of Glasgow to study electronics. When I graduated in ’94, I was lucky enough to land a job at Surrey Satellite technology Ltd, based out of the University of Surrey (at the time). I had a fantastic time working there for 11 years, with the company growing from 30 to 300 staff in that period. I feel very fortunate to have learned about how to do successful small satellite missions from the pioneers. Leaving there was difficult, but it was time to move on. It was only when I decided to move back to Scotland that I considered starting my own space company; it was never in my plans before that, not even for a second.

Q. What is Clyde Space?

Craig Clark: I started Clyde Space to be a small satellite power subsystem supplier. In 2005 hardly anyone was aware of CubeSats, including myself. I learned about CubeSats when exhibiting at the IAF conference in Fukuoka (I started working fulltime on Clyde Space 4 weeks before that conference), and I thought it sounded like a great concept with huge potential. On returning from Japan, I started to put together plans to develop power components for CubeSats, and this has ultimately led to us being one of the main CubeSat vendors in the world.

To me, Clyde Space is about taking a different approach to space; I hope that Clyde Space can play an important part in taking nanosatellite technology to a level where this satellite class can enable high utility value missions and applications.

Q. In a recent post here at the SpaceBusinessBlog, you had commented about Clyde Space’s push toward more web-based purchases of satellite components. Describe your vision for satellite e-commerce and Clyde Space’s current implementation of that vision.

Craig Clark: It is an idea I had from quite early on when working on CubeSats. The cost of CubeSat systems is low enough to enable credit card purchases, so it seemed a natural progression to have an online shop. Ultimately, we are aiming to have as much content as possible in our online shop to enable CubeSat mission designers to make informed decisions and purchases online.

Our next step is to provide free online mission design tools. We have a Cubesat Design Tool (CDT) at Beta level running on Matlab at the moment, and this selects the off-the-shelf systems from our shop to meet mission requirements. It is not quite ready for release to our website, but we hope to have it live this year at some point. With this tool we want to make ‘space accessible to non-space people’. Basically, you’ll plug in you mission requirements, however detailed or sparse, and you get a satellite design that meets those requirements. This will be the next big step for us in terms of space ecommerce.

I get criticized for being too open about our plans, as it opens us up to being copied too easily (this has already happened), and let’s face it we won’t be credited for the ideas, but this is one of the unavoidable facts about how the world works today. For instance, blogs get plagiarized all the time, but the best way to view it is it’s a complement that someone wants to copy you. I also think that too many good ideas never see the light of day due to over protectionism. Having our plans out there just drives me more to make sure we get there first.

Q. How else do you see the web affecting your interaction with your customers?

Craig Clark: The web can be very powerful in this respect and I expect that we will find in the future that we will be able to interact with customers in an open online environment. I don’t think the community is quite ready for that yet, but it will happen. I love the idea of having product forums where our engineers can answer customer questions about our products online and for everyone to see.

To be a successful company, you need to be open and honest; if we have a problem with a product, we need to contact our customers. If we do this in an open, online environment then everyone can see that we address the problems and fix them. Similarly, if a customer has a good experience with our products, that kind of feedback on the product page would be great for us.

Q. How has standardization affected your business?

Craig Clark: I’m not sure it has changed our business because we have always produced standard products. What I would say it that there are elements of the space industry embracing standardization and others that dismiss it. Change, as they say, is inevitable and now that the CubeSat Genie is out of the bottle it ain’t going to go away. Standardization for nanosatellites (1-10kg) is here to stay and I think we can expect it to migrate to small satellites – in fact, NASA is already enabling this with their 6U and 12U CubeSat launch pods.

What the next challenge for the community is: how do we manage and agree on the development of these standards? For instance, we want to use a high reliability connector on our boards, but how to do this and get buy in from the rest of the community? Probably, the standards need to be managed independently of any one company or organization – perhaps there is a role here for the IEEE or the AIAA to facilitate this properly. In the meantime, we’ll forge ahead and try to keep everyone in the loop…

Q. What lessons can the large satellite providers learn from the successful standardization of CubeSats?

I’m not sure they need to learn anything from the success of standardization in CubeSats. I think that the guys involved in ‘Plug-n-play’ and Operationally Responsive Space will be looking at CubeSats and perhaps adapting their approach, but for the large communications and science missions, Boeing, Lockheed, Astrium, etc. will still continue to produce subsystems and structures to their own standards.

The big boys sticking to traditional approaches is also demonstrated in the way that Boeing have produced their CubeSat platform; to my knowledge they aren’t using off-the-shelf systems or community standards, instead it looks like they have developed their own in-house standard. I think it would have been great to see Boeing working with the innovative, small CubeSat companies to help to evolve CubeSats from student satellites to commercial satellites. I think they would have benefited from the innovation that small companies can bring to that kind of partnership. I can tell you that we are working with other large space companies for this very reason, and the relationship is working really well, so all is not lost on that front :o)

Q. How has ITAR impacted your sales in the US?

Craig Clark: Being based in Scotland, ITAR doesn’t really affect us as much as you might think. The UK is, of course, the USA’s closest ally, so generally US companies and organizations are happy working with us. I love the attitude of US customers, and I have a huge respect for the commitment that the US has towards space; it is truly visionary. However, there is no doubt that we miss out on a lot of business from the US because we are not American, and this is not only because of a desire to buy within the USA, but also because of the problems that ITAR brings. I have heard that ITAR rules between the UK and USA are about to be relaxed, so I am hopeful that the US government will allow Americans to talk to us openly about technology again.

Q. How would increased access to launch services affect your customers (even if the price for launch services were unchanged)?

Craig Clark: More launches for CubeSats would certainly stimulate the CubeSat community. What we need is to educate launch providers on the launch method of CubeSats and for them to adapt their model on how they accommodate this type of secondary payload. IMO, a CubeSat launch pod should be treated like part of the launch vehicle avionics. There should be no need for fit-checks, mass-dummies or launch campaigns. If we can work with the launch providers to have a FEDEX approach to CubeSat launches, then we’ll be getting to where CubeSat launch services need to be. It’s the only way to get launch costs in line with the satellite cost.

Q. How do you see the industry evolving over the next 10 years?

Craig Clark: The space industry in general is very dynamic at the moment, especially with the recent success of the Falcon 9 test flight. With respect to our area of the industry, nanosatellites and CubeSats, there is certainly going to be an increase in the capability of very small spacecraft and the numbers of missions. The killer app of the CubeSat is the fact that they enable spacecraft swarms, and I am certain that within the next 5-10 years we will see the first nanosatellite constellations being launched with 100+ satellites per mission.

I read a book about disruptive technologies recently and it presented the phrase ‘Burn the Ships’. Essentially what this means is, there’s no going back. CubeSats are going to disrupt the space industry, but I think near term they will not so much change the way we do space, but more so enable a multitude of new applications, such as:

• passive altimetry using reflected GPS signals,
• global Automatic Identification system for ships or even
• bush fire early warning systems.

They will also provide access to space for everyone due to the simplicity and low-cost nature of standardization. Is it time to burn the big spaceships? Hang on to your matches for a wee while yet…