This brings us to the newest model of the industry's evolution; The New Space Economy. Space becomes a free market where private companies no longer need to form partnerships with governmental institutions to contribute or enact on space exploration. In this day and age, the space race torch is passed on to the billionaires club, like Jeff Bezos with Blue Origin and Elon Musk with SpaceX.
Spillovers
The space industry is still at its growing stage. As the government's reign on the market loosened, the expansion of choice, enabling the free market to happen, is celebrated (Zupan, 2011). Free market environments promote innovation and consider it as one of the drivers for economic growth. The entry of private companies drives competition and so fosters innovation even more so than government-reigned markets (Baumol, 2010). Blue Origin and SpaceX's need to stay competitive and relevant within the free market serves as an engine for them to create more innovations, thus driving economic growth and technological advancementÂ
Space infrastructure holds a critical position in the midst of the digitalisation of society and rising geopolitical tensions (Undesth and Jolly, 2022). Satellite networks have been deeply integrated with telecommunications, while launch facilities are becoming increasingly important within the transportation infrastructure.Â
There are two main perimeters of the space economy, one being the upstream sector and the other being the downstream sector. The upstream space sector consists of launches, space manufacturing, and satellites. While the downstream sector is involved in the daily operations of space infrastructure on Earth, such as the activation of GPS. There are also space-derived activities in other sectors that have relied on space technology but are not dependent on it, like those in the medical sectors (OECD, 2022)
The New Space Economy upstream sector is synonymous with two things: smallsats and reduced costs. Satellites that used to weigh over 1000 kg experienced a decrease in weight. These smallsats, which were less than 500 kg, allow companies to lower their capital expenditure and achieve economies of scale.Â
Joseph Schumpeter's theory of creative destruction explains that dismantling old ideas to give light for new ones would lead to a higher possibility of innovation. This theory could be applied to the new space business, with private companies such as SpaceX, introducing the concept of reusable rockets to the industry, disrupting the status quo of fixed costs within the space industry. Elon Musk, owner of SpaceX, says that reusability in the space industry would be the key to unlocking a bigger potential in the commercialization of space. His opinion is that the problem of why commercial space flights are insanely expensive is because of the cost of making one rocket itself, and how it is not designed for more than one-time usage.
According to CitiResearch, NASA's space launch costs were relatively stagnant for years after 1967, with an average of $16,000/kg for medium/heavy payloads and about $30,000/kg for light payloads. Then, SpaceX's entry to the market introduced reusable rockets that would lower the launch costs with the Falcon 9 in 2010 ($2,500/kg) and Falcon Heavy in 2018 ($1,500/kg) that are 30 times lower than NASA's Space Shuttle in 1981 and 11 times lower than the average launch costs from 1970 to 2010.
Based on the data presented in a seminar by NASA about "The State of Play US Space Systems Competitiveness: Prices, Productivity, and Other Measures of Launchers & Spacecraft.", SpaceX was able to reach a state of economies of scale for its production.
