A surgical dissection of SpaceX’s recent suggestions that it could be generating $30 billion (€27.9bn) in annual revenues flowing from its projected constellation of 4400 satellites are “too optimistic no matter what assumptions are made and could stoke unrealistic expectations undermining the industry’s credibility,” according to a blunt analysis by specialists at Northern Sky Research (NSR).
SpaceX’s plans, themselves unveiled in a report in the WSJ on January 13th, talk about $30 billion being generated by SpaceX by 2025 from broadband and its related connectivity. It is far from clear whether this sum includes revenues from terminals, retail or wholesale supply, sale of satellite capacity, etc, and NSR says it is fair to assume that the bulk of today’s satellite revenues from established operators comes from video-centric applications which NSR says was worth about $13.8 billion in 2015. NSR projects these revenues to grow to some $19.7 billion by 2025 – and do not include these latest SpaceX forecasts.
Indeed, NSR says that SpaceX’s predictions are themselves higher than previous forecasts for “the entire data-centric applications market”. NSR lists the ‘top 20’ largest telco operators and states tellingly that if SpaceX’s numbers are correct, then by 2025 it would place SpaceX as bigger than BT Group, Telecom Italia, Telstra and only just behind the likes of China Unicom, and Orange.
Moreover, the prospects any new business speeding ahead to revenues greater than $1 billion (let alone $30 billion) in just a handful of years, is a challenge. NSR explains that even Dell Computers took nine years to reach $1 billion, Apple took eight years, eBay took seven, Yahoo took seven, and Google took five, Amazon five. “While SpaceX can already start working on selling capacity, the scalability of the business model is much more arduous than most dotcom businesses,” says NSR.
“The best way to predict the future is building it, and NSR will only be pleased to see the satellite industry growing to the levels forecasted by SpaceX, as it would be beneficial for everyone. While it is true that forecasting revenues for such innovative ventures has a significant level of uncertainty, NSR nonetheless believes the $30 billion revenue projection is too optimistic no matter what assumptions are made and could stoke unrealistic expectations undermining the industry’s credibility.”
NSR hedges its bets by stressing that SpaceX’s founder Elon Musk has frequently makes bold promises which generate plenty of press and analyst comment which is helpful for his businesses only for the promises to be downgraded later. NSR cautions: “When analysing SpaceX projections, being an investor, a competitor or an industry watcher, one must keep its independence and not fall into this expectations trap. Otherwise, industry’s credibility would be at risk.”