Commercial space, and space commercialization, weather the pandemic
by Jeff Foust
|“You may be asking why a beauty company is interested in sending our product to the International Space Station,” said de la Faverie.|
The item on the Cygnus that attracted the most attention—other than the space toilet, of course—was a set of ten bottles of Estée Lauder Advanced Night Repair, a skincare product. They weren’t included for a research project, or because Chris Cassidy, the former Navy SEAL who is the only NASA astronaut currently on the station, was worried that his time in space was giving him wrinkles. Instead, Estée Lauder was flying them for a photo shoot: the bottles will be placed in the station’s cupola, with the Earth as a backdrop, and a NASA astronaut will take photos of them for use in a social media marketing campaign by the company.
“You may be asking why a beauty company is interested in sending our product to the International Space Station,” said Stéphane de la Faverie, group president of The Estée Lauder Companies and global brand president of Estée Lauder, at the same briefing where others talked about growing radishes and boldly going into a new space toilet. Okay, why?
“We are always looking for the next frontier or breakthrough,” he said. “We are really incredibly inspired by the work NASA is doing to push the boundaries of space exploration, and we saw a lot of synergy between both our brands’ commitment to science and innovation.”
Estée Lauder is one of the first companies to take advantage of NASA’s new low Earth orbit (LEO) commercialization strategy, one that includes making a small fraction of station resources, such as cargo mass and crew time, available for commercial applications. While it’s hardly the first commercial use of the station—the Russians filmed commercials on their segment of the station years ago, for example—it’s a first step for a NASA effort to build up customers and markets for the ISS and, eventually, commercial space stations (see “Making the transition from the ISS”, The Space Review, September 8, 2020).
Those future commercial space stations, said Phil McAlister, director of commercial spaceflight development at NASA, will need more customers than just NASA to be sustainable. “This Estée Lauder payload is one part of NASA’s overall strategy to help making that transition and to help commercial LEO development.”
“We need many businesses thinking of unique and innovative ways to expand economic activity in space,” he continued. “We also think there’s value from a large, well-known company, such as Estée Lauder, being among the first companies taking advantage of our commercial use policy.”
|“We need lots of people thinking of different things to do in space,” McAlister said.|
But being a non-traditional user of the ISS means, in this case, wrinkling some brows. “I guess I’m having trouble understanding how Estée Lauder’s effort is going to support the commercialization efforts of NASA,” said Sen. Jeanne Shaheen (D-NH), ranking member of the Senate appropriations subcommittee that funds NASA, at a hearing last month.
She directed her puzzlement at NASA administrator Jim Bridenstine, the sole witness at the hearing about NASA’s fiscal year 2021 budget proposal, which includes a request for $150 million for LEO commercialization efforts. Bridenstine didn’t seem prepared for the question, saying that he didn’t think “shooting a cosmetics commercial is the intent of that particular mission.” But neither NASA nor Estée Lauder have said they plan to do anything more than that photo shoot for a marketing campaign.
“We need lots of people thinking of different things to do in space,” McAlister said, “and the fact that this was a surprise to so many people, I think, speaks directly to that point.”
To be certain, Estée Lauder is not investing a lot of money into this effort: the company is paying NASA $128,000 for the cost of transporting the bottles to and from the station (de la Faverie said that the company may auction one of the bottles for charity after their return to Earth) plus the crew time to do the photography in the cupola. The company has likely generated media exposure worth at least as much as that in the form of publicity leading up to the launch.
The company’s willingness to experiment with space commercialization, particularly at this time, is a small sign of a much bigger phenomenon. Six months ago, the economic upheaval created by the response to the coronavirus pandemic prompted predictions of doom and gloom for the space industry. With economic activity in many sectors of the economy ground to a halt, some predicted investment in space startups would disappear. A shakeout would begin, particularly in sectors of the industry with too many companies chasing too few customers, from small launch vehicles to broadband Internet megaconstellations.
What took place was far less severe than those ominous predictions in the spring. “There was a lot of disruption and dislocation that happened in Q2,” or the second quarter of the year, said Chad Anderson, managing partner of Space Capital, during a session of the ISS Research and Development Conference held online last month.
He said that he talked with the companies Space Capital had invested. “It tuned out that our companies were in good shape, and they were good for cash,” he said. Many of those companies, particularly those involved in Earth observation and analytics, “were seeing an uptick in demand.”
That applied to investment in space companies as well. “In Q2, a lot of people said that venture capital was all but dried up,” he said. “The fact of the matter is that didn’t happen at all. In Q2 we saw a ton of investment in the application space.” Investment in other parts of the space industry dipped, he acknowledged, but “came back in a major way” according to preliminary data for the third quarter.
“2020 could be a record year, bigger than anything we’ve seen so far,” he concluded.
|“In Q2, a lot of people said that venture capital was all but dried up,” Anderson said. “The fact of the matter is that didn’t happen at all.”|
Other panelists agreed. “We are seeing an uptick in equity,” said Ann Kim, managing director and sector head for frontier technology at Silicon Valley Bank. One difference, she notes, was that less money would be “scattered around what we saw in the past,” like small launch vehicles. “The dollar amounts might be lower right now just people aren’t sure about the actual market opportunity. They know it will grow, but they don’t know the time horizon.”
“There’s clearly been a huge amount of disruption across most industries, including this one, that has been caused by the pandemic,” Alex van Hoek, a partner at Apollo Global Management. “Disruption like this obviously creates risk, but it also creates some interesting investment opportunities.”
One example is among companies that resell satellite communications capacity for various industries, like aviation. Those companies have suffered significantly because of the sharp drop in airline traffic during the pandemic, forcing some into bankruptcy or to sell off those lines of business to others. “The pandemic has accelerated certain trends,” he said. “It's accelerating a consolidation that needed to happen.”
Another factor is that many space companies were considered “essential” businesses by the federal government and could stay open. Work for NASA and the Defense Department continued, and in some cases the government or prime contractors accelerated payments to smaller companies, keeping them open.
Sometimes, though, that government support went too far. The Defense Department appeared particularly concerned about the health of the small launch vehicle industry, despite (or maybe because) so many companies were seeking limited business. Using authorities made available by the Defense Production Act, invoked by the White House in the spring in response to the pandemic, the Pentagon planned to award contracts to six launch vehicle companies—Aevum, Astra, Rocket Lab, Space Vector, VOX Space (the government services arm of Virgin Orbit), and X-Bow—despite a lack of a formal procurement and competition.
A couple weeks later, though, the Pentagon withdrew the awards. Defense Department officials said the funding they had originally allocated for those contracts was redirected elsewhere, but the awards did prompt questions, never fully answered, about how those particular companies were selected. Some were still in early stages of development, while Rocket Lab is firmly in operation.
“It’s one thing to say you want to help the industry and it’s another to actually do it in the appropriate process,” said Fred Kennedy, former director of the Pentagon’s Space Development Agency, during an interview in July when he was a vice president at Astra. (He left the company last month to become president of Momentus, an in-space transportation company.) “Do we think DOD wants to help the industry? We’ll believe it when we see it.”
That episode doesn’t seem to have harmed the companies involved, which appear to be pressing ahead with vehicle development. Astra, for example, performed a test launch of its Rocket 3.1 vehicle from Alaska last month; the vehicle malfunctioned about a half-minute after liftoff and crashed near the launch site, but the company says it will press ahead with the second in a series of three test flights in the coming months.
Some companies elsewhere in the space industry have stumbled, to be certain. Bigelow Aerospace furloughed all its employees in March, citing stay-at-home orders by the state government in Nevada, where the company is based. However, there’s no sign it’s resumed work despite other businesses in the state reopening in recent months.
Anderson, at the ISS conference, was optimistic about the industry, particularly those that offer services that can directly respond to the pandemic. “Space is proving itself as a really valuable asset,” he said, “and these space-based data are going to plan an increasingly important role in the post-COVID world.”
Commercial space stations, or commercial activity on the ISS, doesn’t quite fit into that model. Nonetheless, Anderson was cautiously optimistic. “There’s a lot of signals that point to yes,” he said when asked if the business case for a commercial space station closed. “There’s the right signals, and we’re going to have to see where this goes. But it’s going to be a balance between upfront input costs and ultimate revenue. We’ll just have to wait and see.”
In other words, we’ll have to see what ventures can, well, boldly go into this new commercial space frontier.
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