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NSRC 2020

 
OneWeb constellation
Some hope satellite constellations like OneWeb can stimulate new growth in the commercial space market, but others are skeptical. (credit: OneWeb)

Charting a path for the space industry’s growth


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If attendees of the recent NewSpace 2018 conference wanted to see what a trillion-dollar industry looked like, they only needed to glance next door.

The conference took place late last month at a hotel at the southern tip of Lake Washington, which separates Seattle from its eastern suburbs. While a park extended up the lakeshore to one side of the hotel, on the other was Boeing’s Renton factory, which produces the company’s popular 737 airliner. At any given time during the three-day conference, attendees could step outside and see a couple 737 jets sitting outside the hangar on the lakeshore, in various stages of production.

“When you look at those existing numbers, it’s almost entirely two things: government and communications,” said Autry. “I don’t know either of those are continually scalable in the way the projections suggest.”

Aviation is a trillion-dollar industry globally by most metrics (commercial airlines alone, just one part of the industry, are projected to generate more than $830 billion in revenue in 2018.) The space industry isn’t there—not yet, at least.

“Depending on which source you use, the space economy right now is about 330 to 350 billion dollars,” said Jeff Matthews, a consultant with Deloitte who moderated a panel discussion at the conference June 26 titled “Space: A Trillion Dollar Market?”

That range is in line with various studies. A report released June 13 by the Satellite Industry Association (SIA), and prepared by Bryce Space and Technology, estimated the global space economy in 2017 to be $348 billion. A study by the Space Foundation released last August pegged the global space economy at $329 billion in 2016.

The bulk of that economy is from commercial space—and principally satellite communications—activities. The SIA report found that the satellite industry contributed $268.6 billion to the global space economy, primarily from satellite services and ground equipment (launch, the most visible part of the industry, contributed less than $5 billion). The Space Foundation report estimated $253 billion in commercial space activities in 2016. The rest of the space economy comes from government programs, both civil and military.

The panel’s title, though, came from several recent reports from investment banks that projected a much bigger space economy in the future. Matthews discussed three of them, including one from Goldman Sachs that projected the space economy would reach $1 trillion in the 2040s. A separate study by Morgan Stanley projected a “most likely outcome” of a $1.1 trillion space economy by the same decade. Finally, one last fall from Bank of America Merrill Lynch projected the economy growing to $2.7 trillion by the 2040s.

The numbers are attention-grabbing, but also not surprising. The space industry has, Matthews noted, “been growing towards that level at approximately a six to eight percent compounded annual growth rate per year for the last decade or so.” Assuming that growth rate continues, and you get to well over one trillion dollars by 2040.

But there’s a problem: the space economy hasn’t been growing at that six-to-eight-percent rate in recent years. Government budgets have been flat or growing only slowly. The satellite communications sector has been hit by a glut of capacity, driving down prices and thus revenues. Companies are ordering fewer satellites and launches as a result.

The SIA report found that the satellite industry grew by only three percent in 2017, while the overall global space economy was even weaker, growing by only one percent. This is not new, either: 2016 saw satellite industry growth of two percent, and three percent in 2015. The industry saw much higher growth in the last, leading to that average of six to eight percent, with double-digit growth not uncommon from 2007 through 2013.

While some in the industry think this may be a hiccup, others believe the lower growth rates represent a new normal, and that the days of 10 percent or higher annual growth are in the past, at least given the current structure of the industry.

“When you look at those existing numbers, it’s almost entirely two things: government and communications,” said Greg Autry, an assistant professor at the University of Southern California’s Marshall School of Business and one of the conference panelists. “I don’t know either of those are continually scalable in the way the projections suggest.”

Others were skeptical that satellite megaconstellations—fleets of hundreds or thousands of satellites to provide broadband communications, like those under development by OneWeb, SpaceX, and others—will restore growth to past levels. “There’s something like 1,200 satellites. Does it get to a trillion dollars by tripling that?” asked Sunil Nagaraj, managing partner at Ubiquity Ventures. “I’m a little more skeptical on that.”

Achieving that growth—getting to a trillion dollars in the next 25 years or so—seems to require new markets. “I don’t know that you get to a trillion-dollar market if there’s not an inflection point,” Autry said. But what are they?

One study seeks to find that out. Deloitte, working with the Space Frontier Foundation, has started a study looking at potential futures of the space economy out to 2030s and 2040s.

“The idea is to look at what could theoretically be possible at the 2030 to 2045 ranges and then work our way back,” Matthews said in an interview at the conference.

“This could be a very transformational study. It could be very impactful. But we need to make sure that it’s not talking about space to space people for the sake of talking about space,” said Matthews.

Specifically, he said the study has four time horizons in mind: now through 2020, 2021 through 2025, 2026 through 2030, and 2031 to 2045. Each of those horizons, he said, will look at the potential state of the space economy at the end of those timeframes and what needs to take place to achieve that.

The study is just getting started, Matthews said, with a workshop held just before the NewSpace conference. One key takeaway, he said, was the importance of not looking at the space industry in isolation with the rest of the economy.

“This could be a very transformational study. It could be very impactful. But we need to make sure that it’s not talking about space to space people for the sake of talking about space,” he said. “We need to make sure this report is accessible to the larger technology innovation communities.”

Matthews said several more workshops, both involving the space industry and others, are planned for the next few months. The goal is to complete the study in about six months, releasing the results in the winter.

Those results, he said, will look at what can be done to accelerate the growth of space markets, without being too prescriptive. “I think there’s going to be overarching, guiding themes,” he said. “The goal of this study, in my mind, is to really help start this more large-scale conversation and allow the larger space community to continue it.”

There will be more focused, actionable recommendations, though, for various aspects of the space economy. “The last thing I want to happen is for this to sit on someone’s shelf, or in a locked closet, and not be of any use to anyone,” he said.

During the earlier panel, participants had their own ideas of what could trigger growth in the space economy. Autry sounded optimistic about the prospects of commercial spaceflight, while Nagaraj emphasized “downstream” applications that make use of space services, like remote sensing data.

But the long-sought “killer app” for the space industry—beyond communications, at least—remains elusive. “I think we haven’t seen yet what that app is on the NewSpace side,” Autry said. “I’m confident that it’s there, but I think the most important thing we need to do is not try too much to define the roadmap. There’s going to be some really unexpected detours, and it’ll be interesting to see what they are.”

And perhaps, when the space industry reaches the trillion-dollar milestone, a future commercial space conference can convene at a hotel that sits next to a spaceship factory rather than an airliner factory.


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