Space travel? Keep dreaming

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Petri Rautiainen's picture

The mission of conquering space has been gradually delegated from government agencies to private companies since the start of this century. For-profit companies such as Virgin Galactic and SpaceX are expected to find new funding and novel business models for space travel while improving cost effectiveness and galvanizing entrepreneurial innovativeness. With NASA stepping back to fill the role of public partner in space station maintenance and research, the aspiring commercial astropreneurs expect untouched business opportunities to unfold.1  But will the private space travel industry discover profitable market space in outer space to support the high hopes raised?

There just has to be money to be made

So far the privatization of space travel has borne some fruit. When the first successful private space tourist, Californian millionaire financier Dennis Tito, took the 7 day long trip to a space station in 2001, the fee was reported to be around $20 million.2 Since then, the dream of going to space has been made decidedly less extravagant. While the fees of the only successful space tourism provider Space Adventures have remained astronomical, the competition has been making some progress.

Virgin Galactic, headed by the flamboyant Richard Branson, embarked on democratizing space travel in 2004. The waiting line for sub-orbital flights with Virgin Galactic now totals around 700 people, each of which have deposited $250 000. While these figures are far from what could be called democratized space travel, they show considerable improvement compared to earlier standards. They also provide a fitting proxy for the unfulfilled demand of sub-orbital flights: with no successful launches (Virgin Galactic had hoped to start as early as 2009) and no future dates announced there is still a potential of $175 million with present-day price levels yet unaffected by future economies of scale. Even the recent in-flight loss of the VSS Enterprise spaceplane only resulted in around 20 would-be astronauts asking for refunds.3

Private companies are also expected to improve on cost efficiency. Paypal and Tesla founder Elon Musk's SpaceX is looking to “apply commercial airline economics to space travel”.4 SpaceX is testing a space capsule model that would be capable of landing safely and thus saving costly rebuilding. This recycling could indicate a cost reduction for customers “by as much as a factor of a hundred”.5 Alas, a reusable Dragon Spacecraft model crashed during landing in early 2015.

Regardless of these improvements, the buzz around the space travel industry stems from potential, not actual results. Liam Bailey, head of global research at the consultancy Knight Frank notes in the Financial Times that more than 70 people with at least $30m in net assets have invested in commercial space travel, 13 of whom are billionaires with a combined wealth of $175bn.6 If successful billionaires and technological innovators such as the aforementioned Branson, Musk and Amazon's Jeff Bezos are taking the next step into space, then there must be abundant business possibilities where the smart money is headed?

Possibly. But as Musk has stated in the FT, “[i]f optimizing wealth was my goal, I certainly wouldn’t have picked the rocket business”.7  So what are space travel investors and customers actually buying into?

It’s the journey, not the destination

Warren Buffett's old joke about becoming a new millionaire by starting off as a billionaire and investing in airlines has been brushed and updated for the private space age. The joke also applies to the high-flown astropreneur, but only partly.

It is true that space tourism is mostly an exclusive hobby for millionaires, by millionaires. The cash flows are expected to reverse direction to the shareholders after decades and multiple delays, perhaps not even then. The already operating side businesses of handling supply missions for NASA and others, launching satellites, and aiding in research provide few additional opportunities. Some of these opportunities are funded by waning government agencies and non-profits, and thus subject to political currents. Hence, sights are set beyond the known horizon: to wealthy individuals, to Mars, to mainstream space tourism.

The comparison between space travel and commercial flight falls short in regard to business models. Space travel is an experience in itself, flying is a mode of transport to new experiences. As the recent low-cost airline trend has shown, affordable prices have been trumping comfort in consumer preferences.8 Airplane passengers are willing to endure burdensome travel to be able to spend more in desired destinations. They do so knowing they are safe, with fatal accident probability when flying as low as 1:300 000 000.9

Space travel is the opposite. It is demanding, exclusive, risky, and unique. Virgin Galactic passengers must train for three days before takeoff, and inappropriate health conditions can prevent the trip. The chance of adding to the list of only a few hundred people who have seen the curvature of the Earth can excite those who desire to stand out. However, this aura of exclusiveness might start to wane, if space travel becomes more established and mundane. The risks of space travel remain high with few signs of diminishing: even with decades of research and cutting edge technology the probability of a fatal accident is estimated by Branson to be a dispiriting 3:100.10 This inherent riskiness seems to be rooted in the precarious and complicated nature of rocket science. Moreover, while airplanes are continuously needed to transport people back from old and new business and leisure locations, space tourism mostly offers a one off, unique trip.

Just another giant leap for mankind

Perhaps the most lucrative opportunities in space travel stem not from conquering it in person, but watching others do. While widespread space travel might not be realistic for many years, the effort and interest invested demonstrate that the dream still lives on. Association with that dream can bring value.

Austrian skydiver, Felix Baumgartner, raised the bar for space-related media events. His record setting jump from the edge of space broke more than the sound barrier: his stunt reached a record 8 million live viewers on Youtube. Over 70 million have replayed the event or viewed related footage on Red Bull's Youtube channel. Those views account for just one channel. The total coverage had a widespread global reach and an estimated value “in tens of millions of dollars” for Red Bull.11 Baumgartner rose to sixth place in the Google Trends People Category for 2012, which is impressive considering he was relatively unknown before the stunt.

In comparison: a Superbowl advertisement of 30 seconds, shown to over 100 million football fans, costs around $4 million.12 At the Superbowl, you are more or less advertising between the main acts. When making history in space, you are part of the main act.

It is no wonder that popular icons such as Lady Gaga, Sarah Brightman, and Justin Bieber are queueing to be the first to sing or shoot a music video in space.13 Even with the Virgin Galactic crashes and Brightman's flu14 setting back these cultural landmarks, the business logic remains unequivocal. A global audience can be reached and history made for the relatively low sums consisting of space travel fees, insurance, and streaming equipment. First comers will engrave their and their sponsors’ names in mankind’s history.

The Mars One project is looking to take space voyeurism one step further. Dutch reality TV entrepreneur Bas Lansdorp sought candidates to take part in a one way trip to live and die on Mars, naturally broadcasted live. The $6 billion cost of the first manned mission is projected to be covered by partnerships, sponsors, and broadcasting rights.15 The timeframe is rather ambitious: the aim is 2024, with 2 years of maximum delay. It is of little surprise that Mars One has been heavily criticized due to the questionable ethics, low financial feasibility, and doubts concerning adequate technical ability. The human factor presents another challenge as noted by Discovery's Ian O'Neill: with no way to control the colonists after the launch, what if they decide to turn off the live stream?16

With only relatively small sponsors, mounting skepticism from the likes of Buzz Aldrin17, donations totaling under a meager $1 million, Mars One has one critical asset in its pocket: people's interest. Over 200 000 candidates signed up to try and survive – German former astronaut Ulrich Walter estimates this probability to be 30%18 – the 7–8 month trip to get to end their lives on Mars, where they will be confined to living quarters under the size of 1/5th of a football field, eating the same food and seeing the same group of people. There is no denying the fortitude and allure of the space dream.

With few results to demonstrate that space travel can become a reality, the dream of colonizing planets and observing Earth from space maintains its appeal. Grasping that dream and not the reality might prove to be the most attractive and down-to-earth business plan yet. That is, until the novelty of making space history starts to wear off and the trumpeted historical events in space become just another giant leap for mankind.