Financial Markets, Impacts on
Financial Markets, Impacts on
The space industry is in the midst of a rapid evolution whose growth is being driven by mainstream commercial forces, with some Wall Street analysts projecting the market to grow to more than $150 billion in the next ten years.
If these analysts are correct, the fuel that will propel the commercial space industry to such heights is the venture capital—the "lifeblood" of every emerging industry—that individuals and institutions are willing to invest in a variety of endeavors. The financing of space projects, once thought by many observers as too risky, has been substantial. More than $100 billion is expected to flow into the space industry between 1995 and 2010.
Until the mid-1990s, most investment organizations were relatively unsophisticated about space projects. In the early twenty-first century, most investment organizations are willing to review business plans on the basis of business prospects and revenue forecasts. As space attracts greater amounts of venture capital, the field will act as a catalyst for economic expansion worldwide in a variety of ways.
For starters, commercial space is spawning a plethora of innovative startup companies that think of space less as a scientific frontier than as a place to make money. Most of these fledgling businesses are not traded on any stock exchange. However, many plan to "go public," meaning that they intend to sell common shares to the public. That is how Microsoft, Biogen, and many other industry leaders began in the 1980s, when the biotechnology and information technology industries were still in their infancy. Like those industries, space will serve as an engine for job growth and wealth creation.
Satellites: A Driving Force
Of all the activities associated with commercial space, satellites are likely to drive the space industry's growth for the foreseeable future. Satellites have the advantage of speed, mobility, and costs, independent of their Earth orbit. A single satellite system can reach every potential user across an entire continent. For many applications, satellite technology provides the most cost-effective way of providing service over a wide area. As a result, satellites will be instrumental in helping to raise the standard of living in many underdeveloped countries where there is little or no communications infrastructure . In that role, the economic impact of commercial space may be incalculable.
Satellites provide a broad menu of services. These range from mobile telephony to direct-to-home broadcast of television, cable, and video programming. The wave of the future is broadband, which refers to a frequency on the electromagnetic spectrum that will allow satellites to provide high-speed Internet access, interactive video, and video on demand.
In 1998 a combination of failed attempts to launch satellites, in-orbit satellite failures, and business plans gone awry sent investors scrambling as they pulled their support from ventures. This could happen again. On the other hand, commercial space is still in an early stage of development, and if recent history is any guide, investors' understanding of this unique business will continue to increase, and sufficient venture capital will remain available.
see also Commercialization (volume 1); Communications Satellite Industry (volume 1); Market Share (volume 1).
Anthony L. Velocci, Jr.
Merrill Lynch. Global Satellite Marketplace 99—Clearing the Hurdles: The Satcom Industry Focuses on Execution. 1999.
Velocci, Anthony L., Jr. "Iridium's Slow Ramp-Up Has Investors on Edge." Aviation Week & Space Technology, April 5, 1999, S18.