Transcript State of the Commercial Space Industry Amaresh Kollipara, Managing Partner, Earth2Orbit LLC Michael Leventhal, Attorney/Consultant, mc² The Law Firm.

State of the Commercial Space Industry
Amaresh Kollipara, Managing Partner, Earth2Orbit LLC
Michael Leventhal, Attorney/Consultant, mc² The Law Firm
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Themes
 Space is not a destination
 Space is an enabler for a variety of business verticals
 Space accelerates and expands business verticals by
providing new, disruptive ways of doing business
• Faster
• Cheaper
• Better
 Governments can catalyze and accelerate space related
businesses
 Infrastructure is a precursor to space-related applications
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-Commercial Space Market SegmentsSpace is an enabler: it enhances existing market verticals.
Infrastructure
Satellites
Launch
In-Space &
Surface
Platforms
Applications
Healthcare
Earth Observation
Science Research
Media and
Entertainment
Navigation and
Communications
Governance
Energy and Mining
Defense
Transport
Operations
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-Porter’s Five ForcesFramework for Discussing State of the Commercial Space Industry
Framework developed by Michael Porter in the late 1970s which
assesses competitive environment, market trends, and other
factors to determine the profit potential of an industry.
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Two Example Industry Segments
Sub-Orbital Space Tourism
Orbital Launch Vehicle
Segment
Not an exhaustive list of companies – examples only.
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Sub-orbital Space Tourism Segment Analysis
Five Forces Analysis
Bargaining Power of
Customers
• Low concentration of
companies
• Low volume of buyers at
current prices
• Cost of switching is high
• Once companies are
established switching costs
may be lower
• Low customer price
sensitivity in the early
stages
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Bargaining Power of
Suppliers
• High at first, but, as the
companies become
established, more suppliers,
less leverage
• Companies can take
manufacturing in-house
• Because of the lack of
bargaining power of
customers, not as important
Threat of New Entrants
• Technological barriers to
entry
• Financial barriers to entry
• Loyalty if early entrants have
solid safety record
• So, Long Lead Times,
Surprise Unlikely
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Sub-orbital Space Tourism Segment Analysis
Five Forces Analysis
Competitive Rivalry
• Thus far, little competition; just
branding
• Later, most companies will
support each other to establish
the industry
• Finally, there will be
competition, but, as prices
drop, demand will outstrip
supply for the foreseeable
future
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Threat of Substitute
Products/Services
• Extreme vacations are
available now
-Titanic,
-Mt. Everest
-HALO
-Zero G,
-Antarctica
-Virtual reality space trips
• BUT . . . If you want the real
thing, you have to buy a ticket
Orbital Launch Vehicle Segment Analysis
Five Forces Analysis
Bargaining Power of
Customers
Bargaining Power of
Suppliers
Threat of New Entrants
• Low concentration of
companies
• High due to specialized parts
and inputs
• Sizable technological barriers
to entry
• Low volume of buyers due
to launch costs
• Suppliers are highly
specialized
• Massive financial barriers to
entry (~$200M+)
• Cost of customer switching
is extremely high
• Low presence of substitute
inputs
• Moderate price sensitivity
• High launch costs are
attributable to high input
costs (in part)
• However, low customer
loyalty – they’ll go with
whomever
• Low bargaining power in
current market
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• Policy, regulatory, and legal
obstacles also prevent easy
entry
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Orbital Launch Vehicle Segment Analysis
Five Forces Analysis
Competitive Rivalry
Threat of Substitute
Products/Services
• Minimal competitive rivalry
existed for decades
• Substitute products/services
do not exist
• New entrants are redefining the
landscape
• Not many alternatives to ELVs
• Few companies in this industry
segment, results in low
competitive market behavior
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• Disruption via substitute
products requires paradigm
shift in product/service
offerings.
Conclusions
 Commercial/New Space Industry is slowly maturing
 We can use traditional methods to analyze this industry
 Fundamentals look strong
 Comparing and contrasting with established industries
produces insights for investors and others
 As launch costs go down demand for industry will
increase and diversify
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