The satellite market is entering a new era of possibility. We have a better understanding of where CubeSats fit into the market. We’re finding new ways to utilize the ever growing dataset produced by satellites small and large. And we’re forging creative paths toward reducing the time between building a satellite and getting it into orbit.

The End of the CubeSat Revolution

The CubeSat form factor has gone a long way toward opening up access to space. Historically, satellite manufacturing and operation has been limited to a select few. CubeSats provided a more cost-effective way for anyone from a university student to a startup venture to experiment with satellites.

Yet, early predictions of thousands of 3U and 6U CubeSats in space haven’t panned out. SpaceWorks’ latest 2017 Nano/Microsatellite Market Forecast shows a several-year slide in 1 to 10 kg satellites launched over the past three years: nearly a 50 percent reduction from 2014 to 2016.

So what’s causing a slide when in 2010 the industry was expecting a “revolution”? From my view, we’ve yet to see Moore's Law squeeze enough revenue-generating payload into 3U and 6U satellites to sustainably offset the cost of launching (and to an extent manufacturing) these tiny satellites. So the world is still waiting on commercial business cases to close with the CubeSat form factor. The economics will likely look more promising if and when launch costs come way down.

However, regardless of whether or not CubeSats carve a profitable commercial niche, I believe their bread and butter will always be in technology demonstration missions — precursor satellites designed to test and prove technology payloads for larger platforms — and university experiments that can secure launch sponsorship from various programs like NASA’s CubeSat Launch Initiative.

Earth imaging: a Sector Poised for growth, but with Fewer Players

Although Earth Observation (EO) companies have been around for decades now, I'm hopeful we've only seen the tip of the iceberg in terms of promising uses for Earth imaging and general remote sensing data. While I’m not sure there will be one “killer app” for satellite images (like search engines were for the internet), I’ve seen too much promise with machine vision, Big Data and other sophisticated analytics. Odds are that with advancements in software, we’ll see continued growth in the EO sector.

With that said, I’m skeptical that this growth will translate into a sustainable ecosystem for even tens of smallsat imaging companies. On this manufacturer/operator side of the business case, it looks like more of a winner-take-all segment where one image can serve infinite customers, and companies with satellites already in orbit will have a much easier time adding new sensors or orbits/inclinations to serve new applications than a startup company will have trying to finance a venture from zero. My bet is there will be more consolidation and fewer new ventures being funded in our future.

The March Toward Daily Launch Capacity

In 2015, at least 20 unique launch vehicles were being developed with the goal of serving the small satellite market. Already, many of those efforts have fallen to the wayside and the fact remains that a widely recognized bottleneck in smallsat launch opportunities exists. So what is the outlook for an industry short on supply? What innovations will bridge the gap?

Yes, launch is rocket science, but in many ways launch is a “known” challenge. It’s physics, engines, and burning fuel. So even the most ambitious and daring of launch companies can’t rely too much on innovating on the technology side. Most of the innovation at all of these new ventures is happening within the manufacturing, supply chain and business model arenas. SpaceX can’t provide cheaper launch just by building a better rocket. To really achieve drastic price reductions, they’re focusing on vertical integration, reusability and a high-frequency launch cadence.

There’s a red flag for me in most of the new smallsat launcher business plans, which is the need for launching every day for the economics to make sense although the industry doesn’t yet demand daily launches. These new companies can only survive this chicken-and-egg situation on venture funding for a couple years at best, after which I expect we’ll see some serious consolidation (and even liquidation) until the industry can support multiple companies launching daily.

In the future, we’ll be able to close the business case on CubeSats or some new small-scale form factor, opening the floodgates for participation in the market. Until then, the industry has some work to do in making smaller and more powerful payloads, as well as achieving daily launches to meaningfully reduce launch costs. Until that time, I think the satellite and launch industries will continue to be a growing, but intimate group. VS