Analysis of satellite imagery can play a major role in the response to the pandemic, such as tracking the number of airliners placed in storage at a California airport. (credit: Planet)

In the recession, space firms should focus on Earth imagery

by Nicholas Borroz
Monday, May 4, 2020

The COVID-19 pandemic will disrupt the space sector. The world is about to enter the worst recession since the Great Depression. More than 30 million Americans have filed for unemployment. China reports its economy contracted by 6.8% in the first three months of 2020. The International Monetary Fund predicts that global growth in 2020 will fall by 3%.

This is bad news for all sorts of business, but especially for firms working in the space sector. Last year’s “collapse” of interest in asteroid mining showed some NewSpace business plans are more aspirational than realistic. There have already been concerns that the launch industry is experiencing a bubble. To that end, SpaceFund publishes a “reality” rating database showing launch firms’ viability, with only 25 of the 132 listed firms getting a rating above five out of ten.

Recent news will only deepen investors’ concerns about the space industry: OneWeb filed for bankruptcy in March, and reports in April indicated Intelsat may also be close to bankruptcy. OneWeb was in the process of building up one of the biggest satellite constellations in low Earth orbit. Intelsat operates one of the largest existing fleets of geostationary communications satellites. These firms’ downfalls obviously pose uncertainty for any firm that expects growth in the satellite industry.

This all means the space sector will soon experience a “great winnowing.” Many firms will fail.

But only in some industries. In fact, one area of space-related business is ripe for development, even in the midst of the pandemic. This promising business area uses existing Earth observation imagery to provide much-needed services. There are a wide variety of applications, including but not limited to: precision farming, environmental monitoring, urban planning, disaster response, engineering and construction, humanitarian assistance, and risk planning.

In fact, too much imagery already exists; supply exceeds demand. So much imagery is already available that it is difficult to deal with all the “big Earth data.” In this deluge of imagery, “The biggest challenge will be making sense of all these data,” according to Dawn Wright, the chief scientist of the Environmental Systems Research Institute. The sources are numerous. Some satellites provide free imagery, notably the European Union’s Sentinel satellites. There are also several private firms that, for a price, provide higher-resolution imagery, such as Planet.

The beauty of business models based on Earth imagery is that they are attractive investment targets. They are cheap, have quick turnarounds, and meet obvious demand. It of course requires money to interpret Earth observation data, especially when deriving existing or creating new spectral indices, but this is nothing compared to the costs of launching rockets or developing satellites. Launching a satellite to low Earth orbit can cost tens of millions of dollars. That amount of money would cover years of operations for an imagery-based services firm. Time investment is similarly less for such companies. Rather than waiting months for rideshares to reach critical mass for a launch that could be delayed due to poor weather, firms can immediately access reliable streams of Earth observation imagery.

The demand is also much more obvious for Earth imagery-based services, which contrasts with the speculative nature of many NewSpace business plans. Asteroid mining is a perfect example. In order for space mining to make business sense, a host of transformational developments must happen first: resources must be identified, spacecraft must reach them, the resources must be processed, and customers must be willing to buy those processed resources. The whole business model depends on other developments yet to occur. This speculation-centric quality of NewSpace business models even holds true for the apparently more feasible industries—satellite servicing and debris management, for instance. It is not yet clear that these industries have clear business cases, regardless of what press releases indicate.

Earth imagery services, on the other hand, meet immediate real-world demand. They do not require economic transformations to become viable. Farmers will pay to know if their crops are experiencing stress. Firms will pay to know how to best plan for weather disruptions. Humanitarian organizations will pay to better understand the crises they are managing. These are clear business cases. They furthermore require little money up front and can be turned around quickly. This makes Earth-imagery based services safe and attractive bets for investors.

Even for firms that operate in other industries in the space sector, they can improve their attractiveness to investors by tying their business models to such real-world applications. For a launch service provider, for instance, it is worth understanding and advertising how launches are part of the value chain that ultimately produces Earth imagery-based services. If a launch firm can show that its rockets transport satellites that then feed imagery back to help farmers increase crop yield, for instance, its business will be a more attractive investment prospect.

Commoditizing existing Earth imagery is less exciting than improving rockets and launching megaconstellations. Space aficionados may thus be disappointed to see financing channeled towards Earth rather than going interplanetary. They should not be disappointed, though, because using existing Earth imagery ultimately advances the space sector in important ways.

A major obstacle to growth in the space sector is not funding or technology, but popular interest. Most people do not see space as relevant: interesting, yes, but not a good way to be spending money. This is why NASA has been perennially underfunded. Funding for the space sector is inordinately decided by governments, and governments represent more than just space aficionados. (Government influence continues to be important, by the way, even in today’s “commercialized” space sector, as many firms still rely on governments contracts.)

The beauty of businesses that use existing Earth imagery is that they will foment popular appreciation of space, which will in turn enable more sustained growth in the space sector. More segments of society will realize how dependent they are on space technologies. If farmers, environmentalists, urban planners, disaster responders, engineers, construction workers, humanitarian workers, and corporations all appreciate space technologies—both conceptually and in terms of paying for them—then this will fuel growth in the space sector. This is why although COVID-19 will disrupt the space sector in the short term, in the long term it may lead to the emergence of a more grounded and relevant space sector. And that can only be a good thing.

Nicholas Borroz is the founder of Rotoiti, a space industry consulting firm, and is working on a PhD in international business at the University of Auckland in New Zealand.

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