Our diary series is nearly complete. We have discussed what kind of infrastructure is needed in space, as well as how much everything is going to cost. Now we turn to the very thing that will sustain any attempt at space colonization: making money.
Making a profit in space has been the dream of space entrepreneurs for many decades now. However, the dream is always shattered when the cold, unblinking light of reality is shined upon the numbers, which is to say, it just doesn't add up. The initial cost is always very high, and it takes many many flights just to break even, let alone having enough left over to call a profit.
But before we can do anything in space, we must have a cheap and reliable way to get to space.
Many people believed (and still believe) that space travel will be opened to the masses in the same way that air travel had been opened: the government does all the experimenting first, then allows the entrepreneurs to take over.
The story of the jet engine has a similar theme: in the beginning it was very costly, polluted like crazy, and consumed vast quantities of fuel. Yet today, the aeronautical world cannot exist (and make a profit) without jet engines. Of course, they have been improved beyond recognition, but that is exactly the point.
The hybrid rocket engine that REL is attempting to build is now in the same stage as the early jet engines were. It's called SABRE (Synergetic Air Breathing Rocket Engine), and we feel that we need to give this engine a chance, for just like the jet engine had revolutionized the world, so too will this hybid rocket engine.
The creator of the Skylon spaceplane that will use the SABRE, Alan Bond, came to understand the need for cheap, reliable transportation into LEO when was working on Project Daedalus. He discovered that his interstellar spaceship could not be built in space without a great shuttle flying first. Any space program desperately depends on whatever vehicle is used to get to space.
Unfortunately, at first, it ain't gonna be cheap.
Continued below the fold...
The numbers revealed in the last diary showed that the startup for this venture will be $10B USD.
A closer examination also reveals that REL will receive a total of $4.5B, or 45% of the startup funds. This high percentage is a reflection of the high importance we place on getting a low cost LEO spacecraft up and flying.
This situation is almost exactly the same situation NASA faced in the early years of the Space Transportation System (STS), known as the Space Shuttle. Here was their choice in a nutshell:
1. Spend a little money now, and a lot of money laterThat the Nixon people chose path #1 speaks more to political expediency than to the long term future of our country.
2. Spend a lot of money now, and a little money later
The chart is also interesting in that it illustrates glaringly just how expensive space can be.
Therefore, making a profit in space seems to be at first glance an almost impossible task. We have laid out the arguments for going to the moon; we will use the moon to make money that can be used to complete the other space infrastructures.
Here's how it will work.
We will use the same technique that other space startups have used: selling tickets in advance.
The ten billion dollars will be raised by selling 2,000 tickets at $5M each to stay at our Low Earth Orbit Station (LEOS) hotel for one week (7 days). They will get to make a spacewalk, and ride on a CM/OUV to a point where the LEOS is no longer in sight. They will get watch science experiments and satellite repairs.
They will also get their money fully refunded, once the moon rocks have been sold, as an incentive to buy the tickets in the first place. So these millionaire get to essentially go to space for free (or use the refund to purchase a second ticket!).
The startup funds will be held in an interest-bearing escrow account. If the $10B goal is not reached, then the money is refunded (along with a slight amount of interest earned).
If the goal has been met, the $10B is then used to get the lunar mission mounted, and to begin assembling the LEOS. Once the LEOS has been completed, the 2,000 tickets can be honored.
Flying 10 tourists on each of two passenger flights per week equals 1,000 tourists per year. This means that it will take two years before we can begin making money from LEOS tourists. It will also take a few years to build up the LSS, so full profit from lunar tourism will not occur for several years.
This is where the lunar rocks come in again. We will subsidize our space program with the money left over from the sales of our lunar material for the length of time it takes to get all of the space infrastructure to be assembled and functioning.
Once we are up and running, we will incur bills which are summarized below.
ITEM UNIT COST UNITS PRICECREDITS
Payroll $30M 12 $360M
Business Costs $10M 12 $120M
Z-1 Space Suits $8M 6 $48M
Skylon Flights $18M 300 $5,396M
Skylon Payloads $20M 187 $3,740M
Skylon Spacecraft $600M 2 $1,200M
For the satellite business, we are setting the price at $7,500/kg to LEO, and $15,000/kg to GEO. Currently the price to place a satellite in LEO is about $10,000/kg and to GEO is about $20,000/kg. In addition, the satellites will be brought up in separate spacecraft, thus reducing insurance costs. The satellites are then assembled in LEO, and placed in the appropriate orbital position.
Lunar tourists will get to stay in space 27.5 days: 10.5 days in transit and 17 days on the lunar surface. We will charge $25M for each lunar ticket.
The amount of money that we should be able to make is summarized below.
Satellite Orbital Placement BusinessTotal Credits: $10,975M
ITEM UNIT COST UNITS PRICE
LEO/SSEO Sat $23M 100 $2,250M
GEO Sat $30M 20 $600M
ITEM UNIT COST UNITS PRICE
Orbital Tourism $5M 1,000 $5,000M
Lunar Tourism $25M 125 $3,125M
Total Debits: $10,864M
So we get a profit of a little over $100M per year.
This blueprint, if followed, will ultimately lead to a robust and viable space program. As we can see, it will be very expensive to pull off, yet at the same time it will be very lucrative.
Of course, this blueprint is not quite yet complete. The very last piece of the puzzle is how to get 2,000 millionaires to figuratively hand over $5M checks to a group of space nerds.
We will first begin by getting aerospace engineers from outside NMSTARG to look over our work (a sort of peer review). We hope they can catch any mistakes that we may have made, so we can correct them and move forward. That, BTW, is one of the reasons why we post our research to DKos.
Once the engineers have "signed off" on the ideas, economists, again, from outside NMSTARG, will look over our startup and operating figures (another sort of peer review). Again, we hope they can catch any errors so that we can correct them. We also need to know what effect (if any) dumping over 4,200 kg (9,000 lbs) of lunar material on the market will have on world prices.
Once that has been "signed off", we will have a business expert work on the business plan, completing the Executive Summary ASAP.
After all of that, we will hire a legal team and form our LLC, and then set up an office to work out of. Our job will be to sell as many tickets as we can.
At the same time, a short video will be created that will explain what a ticket will buy. It will include music and animation to help the viewer understand what we intend to do.
Finally, a documentary will be made chronicling the efforts of NMSTARG to change the paradigm of space.
Marketing: $25,000So this figure, $50,100, represents the true startup cost for our space program.
Office Rental: $3,600
Video Services: $14,000
And you thought it was going to be expensive.
Our journey is now complete, and all the dots have been connected. We show how to finance this beast from an initial $50K investment. We will have a sustainable space program, that launches several times a week, that flys to LEO, and goes all the way to the lunar surface. Even though the operating costs are high, we are able to cover it with money made from satellite placement and tourism.
To be truly sustainable, however, we will need to deal with the spent rockets that we will accumulate as they reach their expiration date. These rockets will have served us faithfully and with dignity. It is only fit that we send them off in a blaze of glory.
Of course, that's a story for another day.
A version of this diary was cross-posted at NMSTARG.
The DKos diary series so far:
FULL DISCLOSURE: I work for the New Mexico Space Technology Applications Research Group (NMSTARG), a commercial space flight venture, which in its current form exists as an unfinished technical paper. NMSTARG is not affiliated with any of the businesses that were discussed in these posting. These diaries exists as a way for the DKos community to get a first look at our research, and to ask said community for any technical and non-technical (just as important!) feedback. The paper provides information on how to make a profit in space, detailing the infrastructure that will be needed and all of the associated costs involved. As such, we hope that it eventually attracts the attention of investors, where the paper then becomes the technical portion of a space-related business plan.