This is the second in a series of articles by satsearch called “Let’s talk about” - designed to help fulfill our mission of democratizing access to the space industry.
NewSpace: rebooting the space industry (Credit: Opportunity Media Inc.).
“NewSpace” is a term that has entered into daily vernacular in the space industry but remains relatively obscure to those outside the sector. So what exactly is NewSpace?
Growth brings many great things with it but can also lead to significant misnomers about the industry. The height of this seems to surround SpaceX, and the infuriating, yet comical debate about Elon Musk: superhero or supervillain?
This article is by no means exhaustive and is likely to evoke a wide range of emotions, reflecting the varied and diverse nature of opinions about NewSpace.
The goal instead is to provide some insights into the growing space industry and the phenomenon known as “NewSpace”. Future articles will delve deeper into specific technical, business, and financial aspects of this burgeoning sector.
What is NewSpace?
To an extent, NewSpace is a buzzword, and you’ll struggle to find one unified definition. In fact, a simple Google search for the word “NewSpace” returns over 13 million results. With so much information and so many different interpretations online, how do we start to get a handle on what “NewSpace” actually is?
To help break down the barriers, we’re going to be dedicating our effort towards exploring the nature of the NewSpace sector over a series of blog articles, with this one serving as a gentle primer.
We’ve been curious about what the space community defines as “NewSpace” for quite a while. So we ran a raffle at the recent International Astronautical Congress (IAC 2018) in Bremen, Germany, where we got the opportunity to engage with the global space community through the ESA Start-Up Zone. To enter into the raffle, attendees were asked to answer one simple question:
“What does NewSpace mean to you?”
We got plenty of interesting and varied responses: some as short as one word and others that turned into mini essays! This was a really valuable exercise for us and helped us get a sense of the space community’s views about NewSpace. After returning from the conference, we realized that these are insights that we should share with everyone. After some brainstorming, we came up with a word cloud that provides a snapshot of what NewSpace means.
NewSpace word cloud based on input feedback at IAC 2018.
The common consensus seems to be that NewSpace is an approach that focuses on lowering the barriers to entry to space industry, by providing cheaper access to space (think SpaceX and Blue Origin’s reusable rockets) and more high-quality and affordable data from space that can be put to use here on Earth, for the benefit of scientists and the general public (think Planet’s “Dove” satellites).
To achieve this, NewSpace has forced people to think out of the box, fuelling innovation (such as 3D-printed rockets, software-defined satellites, and Commercial Off-The-Shelf or COTS products). This progress has enabled new players in the industry to function more efficiently, with a move towards fixed-cost contracts, as opposed to a cost-plus contracts that were prevalent in the Apollo era.
In fact, this seems to be one of the major characteristics of the NewSpace era – the fundamental shift from an industry which was heavily dependent on government agencies (and taxpayers’ money) to a more agile and an independent private sector that relies on innovation, working with much smaller budgets than the early space industry.
To make the definition clearer, ‘HobbySpace’ which was awarded the 2007 ‘Best Presentation of Space’ by the Space Frontier Foundation, came up with a list of characteristics which would help determine whether a particular endeavor is considered as a NewSpace approach. They mainly include the following:
1. Focus on cost reductions
2. An assurance that the low costs will pay off
3. Ensuring incremental development
4. Foray into commercial markets with high-consumer rates
5. Primary emphasis on optimizing operations
6. At the heart of it all, innovation
Obviously, the list is not meant to be exhaustive but it does give us a pretty clear idea of what NewSpace is characterized by.
But what about OldSpace?
The next obvious question that arises is – If this new approach of doing things is denoted as ‘NewSpace’, there must be something equivalent to “OldSpace”.
The Space Age was kickstarted on October 4th, 1957 when the Soviet Union launched Sputnik 1 – the world’s first artificial satellite - into space. This triggered a space race between two superpowers of the world; the Soviet Union and the United States of America. What followed was a huge leap in technological advancement where both the nations reached various milestones and took space exploration to a whole new level.
As defined by Deganit Paikowsky in a paper where he explores the basic difference between ‘OldSpace’ and NewSpace; the ‘OldSpace’ ecosystem refers to space activity that is being controlled by national agencies and is mainly a state-only playground.
The major players in this ecosystem include global superpowers and nations with well-established space agencies, which are backed by their respective governments. OldSpace also includes the large aerospace companies who were awarded ‘cost-plus’ contracts from governments.
Major Players: NASA, ESA, CNSA, ISRO, JAXA, Boeing, Lockheed Martin, ULA, Northrop Grumman, Arianespace.
However, it is important to remember that the emergence of NewSpace did not phase out OldSpace. In fact, there would be no NewSpace without the technological advancement and knowledge gained by OldSpace over the last 50 years.
For space exploration to move in the right direction, both should co-exist, as they serve this industry in their own separate ways. The relationship shared between OldSpace and NewSpace is actually rather a symbiotic one, as we will see in the paragraphs to follow.
As NewSpace has gained momentum, the line between OldSpace and NewSpace has started to blur. OldSpace players, especially the traditional private aerospace companies, realize that in order to stay competitive in the market they need to harness some of the NewSpace approaches, as well as partner with the NewSpace companies. The agreement between the aerospace giant Airbus and satellite constellation company OneWeb is a prime example of this - where it was stated that Airbus would be producing OneWeb’s 648-satellite constellation of Internet-delivery satellites.
Accelerator programmes such as Airbus Bizlab, where the startups work closely with Airbus to transform their ideas to valuable businesses, or the fact that Lockheed Martin is working on ways to compete with startups, bear further testimony to the new relationship developed between NewSpace and OldSpace.
Government agencies have also come out in support and partnered with NewSpace startups. NASA has been leading this initiative, which was instrumental during the early days of NewSpace, when it started providing contracts to develop launch vehicles to companies such as SpaceX and Blue Origin.
This is also evident in recent developments, like when NASA recently chose nine companies to compete for $2.6 billion in contracts developing technologies to reach and explore our Moon.
Luxembourg, a small European country, has also taken major strides in last few years, including launching its own legal framework for the exploitation of resources beyond our planet; only the 2nd country to do so after US. TLuxembourg also launched its own space agency, establishing a fund of $116 million to provide equity funding for NewSpace companies.
The European Space Agency through its technology transfer programme and its Business Incubation Centres (BICs) have focused on improving life here on Earth, by reusing space technology developments and satellite data in terrestrial applications and sectors. Initiated in 2003, the incubation network has grown to 18 centres across Europe and fostered more than 500 new startups. Additionally, to keep pace with upstream innovation across the global, the ESA BIC programme now also directly supports NewSpace companies.
Moving on to Asia, the Indian Space Research Organisation (ISRO) has been actively trying to encourage private space startups to start contributing in this sector. It opened its first space technology incubation centre earlier this year at the National Institute of Technology, Agartala and is in the process of setting up five other incubation centres throughout the country. ISRO also aims to set up a space park to nurture the private space industry in the country.
One of the biggest revelations however has been the progress of the Chinese space industry in this decade, especially over the last couple of years. The year 2014 marked a shift in perspective for Chinese space industry when Premier Li Keqiang encouraged private capital to invest in the sector. In 2018, within the span of four years, it has become the fourth largest market for private space investment, with the fastest market growth among all international markets. In fact, according to a report published in Wall Street Journal in November 2018, there are as many as 80 space startups now operating in China.
This shift in the perspective in a country where things have traditionally been controlled by the government further cements the fact that NewSpace is growing at a faster rate than ever, and helping this growth is the technological expertise and the knowledge gained by the OldSpace players in the industry.
When did it all begin?
The involvement of private sector in space activities is not new, although much of the initiative was taken by the US in the early days. The first commercial use of outer space occurred in 1962 when the Telstar 1 satellite was launched by NASA.
This was followed by the Communication Satellite Act of 1962 in the US, with the objective of joining together private communication companies in order to make satellites more obtainable. These satellites were still launched on state-owned launch vehicles.
A couple of decades later, things started to get better for private industry, as the Commercial Space Launch Act of 1984 was signed. This allowed the private companies to manufacture their own expendable launch vehicles.
The Launch Services Purchase Act in 1990 ordered NASA to purchase launch services for its primary payloads from commercial companies. However, throughout this time private spaceflight was still illegal. It was only in the year 2004 that the Commercial Space Launch Amendments Act was signed and made private spaceflight legal.
The Inflection Point - From cost-plus to fixed price
It is difficult to clearly point to a specific year in history when the NewSpace era began. The term ‘NewSpace’ is not very new. In fact, as early as 1980s the term ‘alt space’ (alternative space) was first used to describe serious commercial activities in the space sector. But the real development only started during the 2000s when companies like SpaceX came onto the scene.
Although, commercial activities were prevalent before the 2000s, all of the contracts offered by NASA and other space organizations around the world were ‘cost-plus’ in nature. This meant that the early private companies were given sufficient amount of funds to make sure that they are able to work on their projects without any hindrance.
The ‘cost-plus’ contract would include the total cost of making the system (satellite, launch vehicle or any smaller subsystem) plus a fixed-fee or a percentage that would count as “profit” for the company. It turned out to be a good deal for these companies and also made sure that the agencies had a direct say in the design of the spacecraft.
Although, ‘cost-plus’ pricing was justifiable in the beginning, as space companies faced stiff requirements and significant risk to build compliant, reliable, and performant system, the inability to innovate fast enough and lack of competition in the market prompted the growth of NewSpace industry.
Enter SpaceX and fixed-price contracts.
With fixed-price contracts, it was now the responsibility of the company to find new ways to create technology and innovate as much as possible, to reduce their cost base and maximize their margin. This shift towards “commercialization” stimulated companies like SpaceX to invest in innovation across engineering, procurement, and business development. To stay competitive in the market, they needed to offer the best possible price, which maintaining performance and reliability. In order maximize profits, they needed to devise new ways to do things at lower costs.
This ensured that innovation was given precedence above everything else. This shift from a ‘cost-plus’ to ‘fixed-price’ contracts was a strong factor to stimulate growth of private industry and underpins the commercialization trend.
Which are the NewSpace industry verticals?
The launch vehicle industry
Perhaps the most exciting and talked about of the NewSpace verticals is the launch industry. This is partly because some of the companies involved are led by well-known, multi-billionaire CEOs, helping them get plenty of media attention, and partly because of the purpose the NewSpace launch industry intends to serve.
It’s pretty obvious why - if you can’t get things to space quickly and more importantly, cheaply, you won’t be able to do business in space sustainably.
Undoubtedly, the poster child in this field has been SpaceX. Their ability to land their boosters back on Earth (both on land and on droneships in the ocean) and use them for subsequent missions have made them a leader in the private launch industry.
Also, their ability to produce materials in-house meant that they were able to cut down the production costs, which have previously turned out to be expensive due to the nature of sub-contracting the design and manufacture of parts.
Hence, the base price for a Falcon-9 launch is currently projected to be about $62 million, almost half the price of its competitors in the market. Launching on a used rocket takes the cost further down by as much as by 30%. On February 6th 2018, SpaceX’s Falcon Heavy rocket, the most powerful operating rocket currently, took off from the historic launchpad 39A at Cape Canaveral. The launch generated quite a buzz throughout the world with a record 2.3 million concurrent views on YouTube.
Blue Origin – Another company which has been at the forefront of the NewSpace Launch industry is Blue Origin. The company aims to use reusable rockets to send space tourists on suborbital flights affordably. Earlier last year, it was also successful in securing contracts from the US Air Force to develop new rockets for military launches.
Rocket Lab – Rocket Lab has been the most successful small-lift launch vehicle company in the NewSpace era. The company aims to provide commercial, high-frequency launch services for the small satellite industry with the help of 3D-printed, carbon-fibre rockets. In November 2018, it was able to deliver the first payload of small commercial satellites to space. The company had its second commercial payload mission on 16th December, 2018, when it launched 13 cubesats to low earth orbit for NASA, making it the first commercial launch company to do so.
Other major players: Virgin Galactic, Zero 2 Infinity, Vector Space, Firefly, Link Space, Gilmour Space, Relativity Space, LandSpace, PLD Space and many more.
The SmallSat industry
One of the main drivers in the NewSpace economy has been the emergence of the small satellite industry. Until about ten years ago, the satellite market was largely led by big corporations and government agencies.
Satellites built and launched in preceding decades were typically large objects orbiting the Earth, requiring signficant development and testing, with budgets in the many millions of dollars.
Huge budgets also meant that corporations were forced to asumme a more risk-averse approach to new launches, to avoid billion-dollar servicing missions if satellites didn’t work as expected. This progressively slowed down the rate of innovation in the satellite industry.
Recently, there has been a shift in the satellite manufacturing market. The same technological advancement in electronics and communications technologies, which ensured the rapid development of the smartphone industry, has also played a significant role in reducing the mass and size of the satellites launched to space.
Smallsats (typically weighing between 1-500kg) ensure a lower developmental cost and are able to take advantage of rideshare opportunities, which in turn leads to lower launch costs and less complexity. Their small size also has enabled satellite developers to rapidly design, build, test, and launch new space missions.
According to a recent report, the small satellite market was valued at USD 2.69 billion in 2017. This figure is expected to reach USD 6.91 billion by 2023, at a CAGR of 17.05%, over the forecast period (2018-2023).
Small Satellite Market Major Players: Airbus Defense and Space, Thales Group, ST Engineering Limited, Surrey Satellite Technology, Space Exploration Technologies, Sierra Nevada Corporation, Thales Alenia Space, Planet Labs, Millennium Space Systems, Geooptics, Harris Corporation, Spire Global, and Northrop Grumman Corporation, among others.
Other ambitious projects
The launch industry and the smallsat industry are not the only areas thriving in the NewSpace economy. This era has also helped churn out several interesting, ambitious and unorthodox ideas, which were barely considered in previous decades. Let’s take a look at a few of them:
1) Space mining – Considering the dwindling natural resources and the ever-increasing population on Earth, space mining could be set to become a major industry in coming years.
The resources available in space (on the Moon, asteroids, and other bodies) will not only help here on Earth but also be highly valuable for future colonies on the Moon and Mars.
A few companies have already started working on the core technology, and it’s just a matter of time before space mining becomes routine. A Japanese company, ispace, is looking to prospect for the resources on parts of the Moon, by building small robotic rovers. Other NewSpace companies like Planetary Resources and Deep Space Industries helped pioneer this industry, despite recent setbacks, and paved the way towards developing a new economy based on space mining. And then, there are companies like Kleos Space and Offworld who are working on maturing and perfecting technologies for robotic space mining.
These forthcoming innovations have even seen universities developing new courses in the field, such as this Masters degree in space mining!
2) Space tourism – While SpaceX is busy with their goal of colonizing Mars, other space companies are working on the business of sending people to space for tourism, hoping to turn it into profitable business. The most well-known company in this area is probably Virgin Galactic.
Founded in 2004, Virgin Galactic plans to take its tourists on suborbital flights aboard its SpaceShipTwo spacecraft. The company performed its fourth test flight with SpaceShipTwo VSS unity on 13th December, 2018, as it reached space (altitude > 80 km) for the first time ever. Other companies also are also venturing along this path, including Blue Origin, Orion Span, Space Adventures and, of course, SpaceX.
3) Private Space Stations – The International Space Station (ISS) has been an amazing success story, with several countries having worked together towards a common, ambitious human spaceflight goal. But, the ISS is set to be retired in 2025 and the US Government has been looking at alternative options.
This has led to the White House’s proposal to allocate $900 million from fiscal years 2019 through 2023 to developing a private space station. Two companies, Bigelow Aerospace, and Axiom Space are already in the race to developing their own fully autonomous stations. Bigelow’s expandable module, BEAM, has been attached to the ISS since 2016 and has successfullly provided performance data on expandable habitat technologies.
Alongside these future applications you can see a variety of other interesting companies here, and in the table below are a few standout projects:
|Commercial nuclear energy for space||Atomos, Apollo Fusion|
|Space debris||Astroscale, LeoLabs|
|Fresh food in space||Bake in Space|
|Blockchain and space||Blockstream, Spacechain, Nexus Earth|
|Additive manufacturing in space||Made in Space|
Where does NewSpace go from here?
Will declining launch cost, miniaturization of satellites and the reinvigorated enthusiasm among the general public help position the space industry as the next trillion dollar industry?
As much as I am tempted to give my own set of opinions on this topic, I think it’s fairer (and probably safer!) to list some of the findings published in various reports published recently.
A report by Goldman Sachs predicted that the space economy will reach $1 trillion by the 2040s. A separate study done by Morgan Stanley was slightly more specific, suggesting that the space industry will reach $1.1 trillion by the 2040s. A third study conducted by Bank of America Merrill Lynch projected this number to go as high as $2.7 trillion by the year 2040.
The space industry is currently valued at $350 billion, so going by the projections above, reaching a trillion dollar industry by the 2040s would require an annual growth rate of approximately 7%. That’s the kind of growth rate the space industry has seen for some time, although it has been growing relatively slowly in very recent years. A report prepared by Bryce Space and Technology found that the global space economy in 2017 was $348 billion, only 1% growth from the year 2016.
While it’s easier to reach general conclusions, the number of variables and unknowns moving forward makes it difficult for these organizations to make accurate predictions. Morgan Stanley estimates that satellite broadband will be responsible for 50% of the projected growth of the global space economy by the 2040s. Launching satellites that will provide internet services throughout the world will be crucial for various other industry verticals such as autonomous driving and Internet of Things (IoT). Hence, the success of the satellite broadband industry will not only depend on the launch cost but also on the performance of these industry verticals.
Other variables, such as availability of funding will also play a major role. Except for the US (and maybe China!), funding is still an issue in the space industry, in the rest of the world, as investors are skeptical about this capital intensive sector. How the space industry grows over the next couple of decades will depend on how well investors are educated about risks ands rewards in the industry.
Consolidation in the launch vehicle industry is also one of the common predictions for the future. Some experts believe that there are ‘way too many’ companies in the launch market and eighty to ninety percent won’t make it in the end. There is a belief that the demand for the small satellites is insufficient for all the vehicles in development.
It will be interesting to see whether the above predictions hold true for the industry. Some of the things that will happen are – launch cost to space will go down further with the increasing use of reusability and 3D printed rocket parts, earth observation data will be more easily and cheaply accessible, as the number of satellites deployed in space increases, and as the NewSpace industry grows we will see more unorthodox and futuristic ideas that will get funded and capture the public imagination.
What future do you envision for the NewSpace industry?
For the all the curious souls out there..
The space industry has been growing at a crazy rate, and the enormous amount of daily news headlines related to this industry bears testimony to this fact. In fact, we faced a similar challenge while working on this article to keep ourselves updated with everything going on around the world. Here are some interesting things that have happened during just the last few weeks:
And since 2019 is here, here’s something else to get us all excited.
Ultimately, only time will tell!
Gourav Namta is a mechanical engineer by profession and a space enthusiast. In his free time, he enjoys penning down his thoughts on space engineering & exploration through articles and blogs. For any questions/comments/feedback, feel free to get in touch.