Michael  McLean                @michael_mclean

The  History  and  Recent  Developments

Market  Structure  of  Space  Launch  Services

• In  2013,  revenues  from  global  commercial  actors  were  es?mated  at  ~$256.2B    

• Of  that,  the  manufacturing  supply  chain  for  spacecraJ  systems  accounted  for  ~$85B

Primer

• The  industry  has  origins  in  the  early  1900s  with  the  first  patents  being  filed  for  rocket  designs  by  Robert  Goddard    

• In  response  to  the  Soviet  launch  of  Sputnik  I  in  1957,  the  USA  began  large  scale  investments  in  space  systems  

• Ini?ally  dominated  by  government  actors

Brief  History

 

The  Space  Stack

Downstream:  Consumer  Applica:ons

Operators:  Launch  service,    and  satellite  service

Tier  1&2:  Design  and  manufacturing  of  equipment  and  subsystems

Tier  3&4:  Material  &  Components  suppliers  Scien:fic  and  engineering  consulta:on

Primes:  Space  system  integrators

Four  Main  Factors    

• Civilian  R&D  budgets  

• Ins?tu?onal  budgets  

• Regulatory  Frameworks  

• Human  Capital

Industry  Inputs

Sample  of  Outputs  

• Rocket  manufacturing  and  launch  ac?vi?es  

• Launch  Insurance  Market  

• Satellite  telecomms  

• Earth  Observa?on,  GPS,  Weather  tracking  

• Human  Spaceflight  

• Launch  Insurance  Market

Industry  Outputs

Commercial  Segment  

• Higher  elas?city  of  demand  since  they  answer  to  shareholders  

Government  Segment  

• Lower  elas?city  of  demand  since  projects  are  in  na?onal  defense  and  scien?fic  interests

Segmenta:on

Cournot  Oligopoly  Structure  

• In  the  Cournot  game,  if  the  fixed-­‐costs  are  too  high,  the  equilibrium  #  of  firms  is  0.  The  space  launch  market  followed  this  structure  in  its  early  days,  so  governments  had  monopolies  on  space  access.  

• The  lower  the  fixed  cost,  the  higher  equilibrium  #  of  firms,  so  as  costs  fell,  there  were  commercial  entrants

Government  Actors

• In  2006,  Boeing  and  Lockheed  merged  their  space  ventures,  crea?ng  the        United  Launch  Alliance  (ULA)  

• This  created  a  pure  monopoly  in  the  defense  satellite  market,  which  has  been  just  recently  been  opened  for  compe??on  

• In  2014,  a  $11B  contract  was  awarded  for  27  launches  without  compe??on

Merger  Concerns

Atlas  V

Analyze  the  2006  Lockheed  &  Boeing  Merger  

• Inves?gate  the  consolida?on  in  the  defense  market  

• Are  there  any  indicators  of  an?-­‐trust?  If  so,  what  is  a  possible  solu?on?

My  Proposal

Data  

OECD  (2014),  The  Space  Economy  at  a  Glance  2014,  OECD  Publishing,  Paris.  DOI:  hCp://dx.doi.org/10.1787/9789264217294-­‐en  

Images  

hhp://upload.wikimedia.org/wikipedia/commons/1/1f/Atlas_V_551_with_New_Horizons_on_Launch_Pad_41.jpg  

hhp://www.spacex.com/media-­‐gallery/detail/126606/4741  

hhps://www.nasa.gov/sites/default/files/16242684611_b978aaa7be_o_0.jpg  

Works  Cited