🚀 Faster, Please! — The Podcast #35

As the cost to launch a rocket into orbit has come down over the past decade, a slew of startups have joined the emerging space economy. But is there enough business for all these companies? And what's the broad economic case for space? In this episode of Faster, Please! — The Podcast, I'm chatting about those questions and more with Michael Sheetz.Michael is a space reporter for CNBC where he also writes the "Investing in Space" newsletter.In This Episode* The business case for space (1:05)* SpaceX, Blue Origin, and the other players in space (4:03)* How much demand is there for space services? (10:15)* To the Moon and Mars (13:59)Below is an edited transcript of our conversationThe business case for spaceJames Pethokoukis: How do private companies intend on making money in space over the next decade?Michael Sheetz: The first and foremost way is the tried-and-true way when it comes to making money in space, which is providing communications data and other services back to people here on Earth. You're talking about communication systems like Starlink, which are the next generation of communication services that have been around, from the geo-communication satellites of decades prior. That's the primary, immediate way that people are making money right now in space. The second way that people are making money in space is by launching satellites for other customers: You're talking about the rocket business, the transportation business. You see stuff like OTVs, or orbital transfer vehicles. That's a way to deliver stuff into space.Then there's a third kind of newer way, which is just microgravity research in general. That's coming to the fore really in the last decade as NASA has really opened up the International Space Station as a testbed for commercial technologies and not just NASA's own technologies. And a lot of companies see that as really just a first foray into that ground. Some of them are trying to do it in their own way by sending capsules into orbit and bringing them back, not going to a space station. The other way is by sending it to a space station, and there are actually four or five major projects underway in the United States to build private space stations in orbit. Those are companies that are either working together or building their own solo units, and they're all just kind of vying for a future in which you don't just have one giant space station, because the International Space Station is huge, but instead of the ISS, you have lots of these little space stations that people can sign agreements with. Say a pharmaceutical company wants to test out a new drug in orbit, they'll sign a research agreement with a company that's going to fly them up there, test it out, fly it back down. They might have astronauts on board. They might not.The other way — this is the other kind of nascent sector — is the lunar infrastructure world, and that's all very much a new space race, if you will, because there's a geopolitical element there. We’ve got India, we have China both firmly in that mix. China has been arguably one of the most successful at landing on the Moon in the last decade. And NASA, instead of trying to fly themselves to the Moon for these cargo missions and research, they've actually gone to companies and said, “Hey, bid on these contracts, deliver services to us. We'll put our payloads onto your spacecraft, your lander, your rover, and then get it down to the Moon and either get us back data or even return materials.” But mostly just, “Let's try to figure out if we can actually make use of the water that's believed to be on the surface of the Moon.” And that's a really big key point: The first round in terms of trying to make use of the Moon is all about, can we harvest the resources that are on the lunar surface?SpaceX, Blue Origin, and the other players in spaceMuch of the conversation among regular people, to the extent they're aware of really what's going on, what you've just described so wonderfully, is SpaceX. Maybe they've heard of Jeff Bezos and Blue Origin. How far behind is Blue Origin of SpaceX? Do we have a feel for where that company is?I, at this point, wouldn't even put it as really a competition, because SpaceX is very much in a league of their own. Blue Origin has so dramatically taken a different approach to development, very much more akin to the aerospace and defense contractors of the past. It's fascinating because both companies are actually very similar sizes in terms of personnel, but SpaceX has taken this approach of, let's just get one win after the other and try to just break things a little bit at a time and keep pushing further that way. Whereas Blue Origin is taking the route of, we want everything to work the first go, the first launch, the first landing on the Moon, all these other nuances in there. And so far, SpaceX's strategy has been dominant. Now, the United States is not looking at United Launch Alliance, one of the existing providers for rocket launches, as its primary source of both getting astronauts and satellites in orbit, they're looking to SpaceX. There's a flipping of the head that's happened in the last decade.In this next decade, and even just in the next three to five years, it's a really critical point in Blue Origin's history where the company has been around longer than SpaceX, albeit they took a very different approach at the beginning and have taken a very different approach in recent years as well. But they need to show not just for the customers that they signed contracts for—such as United Launch Alliance, delivering engines for them, or different contractors like NASA, providing services to the Moon—they need to show that they can start delivering on those contracts and start actually competing. Maybe not head to head right away, but at least start to get some actual performance and execution as opposed to basically at this point saying, “Here's our grand architecture of everything that we want happen over the next 100 years,” which would be amazing. I can totally see where Jeff's vision for people in research laboratories and living in Lagrange points and all these kinds of things could happen. But you have to make some first inroads, and they haven't yet done that. It's a one-horse race right now.Since we've been talking about those two companies: Are the goals the same but the strategies and timelines different or are they fundamentally trying to achieve different things?They very much have distinct missions when you just look at how they think about where they're going, the trajectory of the company, the trajectory of the space industry writ large. They do have very similar fundamental steps that they have to achieve to get towards those missions. When you look at one of their main products at Blue Origin, for example, with their New Glenn rocket, you still have to do the same basics of, fly a satellite to orbit, land it a couple times successfully, start reusing it and show that you can reuse it efficiently. Those are all things that Falcon 9 did and now SpaceX is going to have to do with Starship as well. They both have similar incremental steps, even if their broader mission targets aren’t the same.I think one really interesting thing about where the space industry is at today is that it actually really isn't about just SpaceX versus Blue Origin, but it's also Rocket Lab. It's also Maxar. It’s also Planet. There are all these different pieces of the broader architecture that are in the space economy and they're all kind of vying for different revenue streams within the space economy. But when we talk about SpaceX and Blue Origin, and I think we might be kind of oversimplifying the industry just into launch and basic transportation as opposed to what it really is in a lot of ways, which is infrastructure. And that's the kind of holistic approach, when you think about the companies that are players in that, where you start actually seeing Rocket Lab just did their 40th electron launch. Yeah, it’s a small launch. No, it's not the same service as Falcon 9. But they've carved out a really important niche in that, and they're trying to use that to not just build a larger rocket, Neutron, but also build out a very strong space systems division and then provide services.Sort of like how SpaceX did with Starlink where they were like, “Look, we've got the rocket business down. Let's go find revenue sources.” The first one right off the bat was, “Let's get better internet service, broadband into hard-to-reach areas at low cost comparatively to years past, and we'll do it in a way that just really provides this holistic coverage: You can go anywhere in the world, plug it in, it will connect to one of our satellites.” As opposed to just the regional focus of past communication systems. I think one really important key aspect of where the industry is at today is the fact that there are all these different companies that may not have billionaire backers, but they have big investors behind them, they have big revenue coming in: Planet and Rocket Lab, we're talking about pulling over $100 million in revenue a year. That's not inconsequential. Maxar and the like and others are really trying to further establish themselves. I think of Iridium with their communication systems.There are all these different players that have their pieces of the overall industry. Some of them compete head-to-head, some of them don't. And I think that's where you start to see an industry that isn't at a little bit of, for lack of a better way of saying it, a single-fault failure situation, where if Elon Musk or Jeff Bezos loses interest in space or something worse happens to them, all of a sudden the US progress in space evaporates. That's not the case today, and I think that's the most actually exciting thing about where the broader space economy is at.How much demand is there for space services?Is there enough business for all these companies? Are there enough people who want to put things in space and do things in space to justify this archipelago of companies that you've just described, or do people talk about [how] there's going to need to be a shakeout? Or is it just that there's so much potential demand, boy, it is going to be hard to fulfill it all?I'll give an example to answer your first question, but I want to hit the second aspect of what you talked about first. There is going to be a shakeout right now, and I think there is a shakeout underway. We've seen a lot of M&A [merger and acquisition] activity this year. We've seen a couple bankruptcies. We've seen a couple of people get acquired for likely very little money, and that's because the free money of the past has gone away, especially in a high capital-intensive industry with high risk. Even as we're seeing now, Viasat, one of the most established players, had their crown jewel new satellite malfunction shortly after getting into orbit. Then the company they recently acquired, a UK company, Inmarsat, one of their recently launched satellites malfunctioned in orbit. So now Viasat has got two malfunctioning satellites that they're trying to deal with. This is a really high-risk business that we're talking about, and that opens up new potential for M&A, and it also opens up new opportunities as valuations have come down where companies that might not have been either competing with each other but could see each other as compatible are now starting to join forces effectively. And other companies that had a stronger position coming into this shakeout period are starting to take advantage of that, as well as investors who are behind those companies.This first thing that you talked about, and I'll give the example, I think the data communications world is the perfect example of, is there enough money and is there enough demand to go around for everybody? When you look at just purely broadband services, which actually there's quite a bit of variety within how you provide those services, which kind of customers you target, that realm has seen no shortage of demand. Every single company you talk to, whether it's a company that provides regional-focused broadband service to enterprises in one location or another company that goes after transatlantic flights and providing in-flight Wi-Fi, every single executive I talk to across that data communications business says, “We need more satellites and orbits so that we can provide more supply because there's more demand than we can provide.”And we're talking about what's already one of the most crowded parts of the space industry, from an established perspective, with multiple players around the world providing services all over the place. The fact that all of those guys are looking at this hockey stick from a demand perspective and all the different layers that they can provide service to — whether it's households, governments, businesses, shipping companies, whatever — that's where there's a lot of excitement around, this established market is even growing at a high rate, what about all these other little nascent markets? I'm not talking space tourism. That might be a fun place to watch that people always get excited about. It’s one of the lowest revenue sources in the industry. I'm talking about the lunar infrastructure that I mentioned before. Remote sensing is one of the wildest frontiers in the last decade, and when you look at the varieties of companies that are competing and the customer capture that they're getting and the new applications that are coming out of that, it's absolutely wild. And so I think those new growing verticals are just showing that, yes, there's still demand, it's still growing.To the Moon and MarsAssuming that the US, NASA, we're going to go to the Moon, we're going to stay on the Moon, we're going to build stuff on the Moon, over the next 15 years will most of those rockets be NASA rockets taking people and stuff to the Moon, or SpaceX rockets?I don't even think it's just going to be SpaceX rockets. I think Starship definitely, if they continue to make progress… But mind you, it's been a little bit of a bumpy road in recent years. We have some reliability issues with the Raptor engines we’ve got to still work out. Albeit the first flight was called a success, I think rightfully so, but it's an incremental one and they still have a lot of steps to go. And when you go back to years past, just even flying humans on Starship, SpaceX has been very candid about saying, “Look, we want to do hundreds of these flights before we put people on this thing.” So maybe it's not Starship, at least in this decade, that's flying tons of people to the Moon. But you've got a workhorse in Falcon 9 that can deliver lunar payloads. It is going to deliver lunar payloads even in the next year.You've got a number of other rockets that are coming online to deliver services. NASA's own rocket, SLS, really isn't going to fly more than once a year at best. And that's pretty optimistic. I see that as lifting the biggest stuff that we need to try to get there, such as getting Orion and Lunar Gateway and all these other things. But really the core of it is, when we're talking about building infrastructure on the Moon in a way that you have a sustained presence, that's a group effort. This is not a single company, single agency doing that. That's something where you need the services of the likes of Firefly building their lunar lander, Astrobotic out of Pittsburgh building their lander. You need Rocket Lab to get Neutron flying. You want Relativity to have Terran R flying. You want this robust ecosystem of transportation devices sort of like we do of any other method of transportation here in the United States and globally, where it's not just one company that builds all the ships. Even in airlines, Boeing and Airbus dominate; however, they're two of a broader ecosystem of several other companies that have carved out niches for them making regional aircraft and stuff like that. And that's what's going to be needed to build that broader lunar infrastructure.I love the notion of going to Mars and colonizing Mars. What is your sense of other people in the space industry who don't work for SpaceX, what do they make of that goal that Elon Musk talks about? Do they view it as just Elon being Elon, these kind of huge aspirational goals? Or do they think this is something we can do as a space industry over the next quarter century?One of the most fascinating things, I think, is that you would get a huge variety of answers from people in the space industry on whether or not (1) they fundamentally agree with that premise that we should be doing it, what it should look like, etc., and (2) how we're going to make it happen if they're even in favor of doing so. And I think that's an amazing reflection of the different interests and the variety of folks who are in this industry, the inspiration that they take from the different missions of either their companies or agencies or projects that they're working on. I think at its core, it's something that still feels too far out to really put a pin in it because there's not a right way to do it currently and not an effective way to do it currently. And so it's something that, sort of like with the Moon and the Artemis Accords providing this new framework of cooperation and how we use resources and space, going to Mars, it's only really going to become a question of how should we be doing this once we're actually getting closer to doing it.I think a commercial company getting a lander on Mars is going to be a first start in that new era. But even that I don't see happening for another five to six years at least, and that's just maybe a small spacecraft. So that's a question I think is extremely open ended. But I do see us on this trajectory where it's not just the Moon, it's not just Mars, it's other planetary bodies, it's asteroids, it's all these other things of exploration where once we start getting into the realm — and you can look at any of the explorers of the past to kind of find your guide for how this happened, there were people who made that first foray into a new land and a new realm, and then after that we're like, “Okay, so we can do this. Cool. Now let's try to figure out what this should really look like and what establishing a settlement on another planet would really look like.”My short answer is, we're so far away from it in a realistic sense that I think what I would point people to now, with the fear of them losing interest in what space can really provide to the rest of humanity and the benefits it provides, that they should be looking at the current infrastructure that we have here on Earth and how it benefits us and makes our everyday lives better, one, and two, the real near-term possibilities of what the United States putting a presence on the Moon, China putting a presence on the Moon, India putting a presence on the Moon, what that looks like geopolitically, what that looks like from a resources standpoint, how we can compete in a way that's not leading to some sort of new conflict in space. That just seems like a place where things could escalate really quickly and poorly. As opposed to what's really happening right now is, in the next couple of years we're going to see more and more spacecraft landing on the Moon, and I think that's an exciting near-term future. What we do on Mars, what we do on asteroids, what we do elsewhere, it's going to be something down the road. This is a public episode. If you’d like to discuss this with other subscribers or get access to bonus episodes, visit fasterplease.substack.com/subscribe