The launch market

Launch is the enabling industry for everything else, and it is unusual: high fixed costs, low volume by industrial standards, a small number of buyers, and prices that are negotiated rather than listed. Published figures should be read with that in mind.

Reading a price

A quoted launch price is not a cost, and it is often not what anyone paid.

List price against contract price

Published prices are anchors for negotiation. Large customers, government customers and multi-launch buyers pay something else.

Price against cost

A provider may price below cost to win a strategic contract, to build cadence, or because the vehicle is government-subsidised. The price reveals commercial strategy, not manufacturing economics.

Dollars per kilogram is an accounting fiction unless the payload fills the vehicle

A 2 tonne satellite on a 22 tonne launcher pays for the whole launcher. Its effective cost per kilogram is eleven times the headline.

Which orbit

Cost per kilogram to LEO, to sun-synchronous, to GTO and to escape differ by large factors for the same vehicle.

The third point is the one that most distorts comparison. Cost per kilogram is only meaningful for a payload that saturates the vehicle, which is why rideshare pricing, quoted per kilogram of actual payload, is a fairer basis for comparing access cost than any dedicated launch figure.

The long trend

Cost to orbit was roughly flat in real terms from the 1970s to the 2000s. Vehicles improved in reliability and capability while price per kilogram did not fall appreciably, because they remained expendable and flight rates stayed low.

Two changes broke the pattern.

Vertical integration and design for manufacture. Building engines and vehicles in-house, at rate, with a design intended for production rather than for maximum performance, lowered unit cost before reuse contributed anything.

Reuse. Recovering and reflying boosters removed the largest single manufacturing cost from each flight. From Reusable launch systems, the economics only work when refurbishment is cheap and cadence is high, and both conditions were met.

The result is roughly an order of magnitude reduction in price per kilogram to low Earth orbit over about fifteen years, with a further order of magnitude claimed as the goal for fully reusable vehicles. The second has not been demonstrated.

Segments

The small dedicated segment has been the most disrupted. Rideshare programmes flying dozens of smallsats at a time compressed prices to a level that several dedicated small launchers could not match, and a number have exited. What dedicated small launch still sells is control: a specific orbit, a specific date, and no dependence on a primary payload. That is worth a premium to a constellation operator replacing a satellite in a specific plane, and to government customers with schedule requirements.

Cadence and utilisation

Flight rate matters more than headline price for a reusable provider, because fixed costs dominate.

A launch company carries recovery vessels, landing pads, integration facilities, range costs and a standing workforce whether it flies five times or a hundred times a year. Spreading those across more flights lowers cost per flight directly, which is why cadence is pursued as an end in itself.

This creates a reinforcing loop that is difficult for a new entrant to break into. High cadence lowers cost, lower cost attracts demand, more demand supports higher cadence. A competitor entering at low cadence faces the same fixed costs spread across few flights and cannot match the incumbent’s price, regardless of how good its vehicle is.

The internal demand branch is the structurally significant one. A launch provider that also operates a large satellite constellation supplies its own cadence, which decouples its flight rate from external market demand and makes the loop self-sustaining in a way no pure launch provider can match.

Concentration

The market is highly concentrated by any ordinary measure. A single provider accounts for a majority of global orbital launches and a much larger majority of mass to orbit, and a large fraction of those flights carry its own satellites.

This raises questions that are commercial rather than technical.

Assured access. Government customers have long paid a premium to maintain more than one capable provider, on the reasoning that a single point of failure in national launch capability is unacceptable. That policy is why several otherwise uncompetitive vehicles remain funded.

Pricing power. A dominant provider with the lowest costs can price to exclude rather than to maximise margin, and there is no obvious remedy in an industry with this structure.

Customer and competitor. When the dominant launch provider is also the dominant satellite operator, its competitors in the satellite market buy launch from it. Whether that relationship can be conducted neutrally is a live concern for regulators and customers alike.

Demand

Supply-side analysis dominates discussion, but the market is bounded by demand, and demand has been remade in one direction.

The concentration of demand in constellations is the notable feature. Removing the largest constellation operator’s own launches leaves a market considerably smaller than the launch statistics suggest, which is why forecasts of demand for super heavy lift beyond that operator’s own needs are speculative.

Elasticity is the open question. The stated thesis behind cheap launch is that demand will expand to fill capacity: that markets currently priced out will appear once cost falls far enough. Some evidence supports this, since constellations at current scale were not viable at 2005 launch prices. Whether another order of magnitude reduction unlocks proportionally more demand, or merely lowers cost for existing customers, is not yet demonstrated.

References

• Jones, H. W. “The Recent Large Reduction in Space Launch Cost”, ICES-2018-81, International Conference on Environmental Systems, 2018.
• FAA Office of Commercial Space Transportation, annual compendium of commercial space transportation statistics.
• Bryce Tech, State of the Satellite Industry Report, published annually.
• European Space Policy Institute reports on launcher competitiveness and assured access.
• SpaceX Falcon User’s Guide, Arianespace, ULA and Rocket Lab user guides for published prices and performance.