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Blue Origin's New Shepard Auction: Space Business, May 2021

Why Jeff Bezos turned to an auction for the first flight on his suborbital rocket

The New Shepard rocket on the launch pad in 2018.
This story was published on our Space Business newsletter, A glimpse at the economic possibilities of space.
  • Tim Fernholz
By Tim Fernholz

Senior reporter

Published

Dear readers,

Welcome to Quartz’s newsletter on the economic possibilities of the extraterrestrial sphere. Please forward widely, and let me know what you think. This week: Blue Origin’s auction, China’s busy space program, and Starlink’s early reviews.

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How much should a visit to the edge of space cost?

Blue Origin, Jeff Bezos’ space company, is using an auction to find out. The current high bid? $2.6 million for a 20-minute jaunt up 62 miles (100 km), past the edge of the atmosphere, including about three minutes of zero-g playtime.

Suborbital tourist flights have been just around the corner since 2004, when a team led by American engineer Burt Rutan won the first X-Prize for launching a privately built rocketplane on two short flights past the Kármán line that denotes the border with the final frontier. British tycoon Richard Branson then started a company, Virgin Galactic, to commercialize the technology and began selling tickets for $250,000 a pop, building up a manifest of several hundred future fliers.

Seventeen years later, Virgin Galactic is a public company that aims to fly its first passengers this year, and says that future tickets will cost more than the initial quarter-million. Over the same period, Blue Origin developed its own six-passenger suborbital vehicle, the New Shepard, a reusable rocket that takes off and lands vertically to launch a capsule into space. Blue has flown the New Shepard 15 times successfully since its debut in 2015, and will fly its first passenger on July 20.

Blue Origin had been tight-lipped about what rocket fare might come to. When it comes to comparisons, space tourism analysts look to super-luxury vacations that can cost hundreds of thousands of dollars, or to multi-day trips to the International Space Station that cost tens of millions of dollars. Neither one quite fits the bill.

You might start with the cost of operating the vehicle. Blue Origin remains privately held and unforthcoming about the accounting, but Virgin Galactic says each of its rocketplanes flies at a marginal cost of just over $400,000. The New Shepard’s costs might be in the same ballpark. And we also have a rough idea of how much money it can earn flying without people: Last year, based on prices for research cargo, I estimated that Blue could pull in perhaps a million dollars with one fully-loaded launch of the New Shepard.

The real problem, economically speaking, is we just don’t have enough information about the demand for this service. And that’s why Blue’s auction (and its design) is so interesting. Auctions have always been popular in Silicon Valley as a way to do price discovery; heck, Google went public with a dutch auction. Amazon’s infamous HQ2 selection process was a kind of auction, revealing exactly what cities around the country would pony up to host a second Amazon headquarters, and handing the company a passel of profitable info along the way.

Blue Origin’s auction operates in three stages: The first two weeks were closed bidding, with people making secret bids for how much they’d pay for a ride. This was most important, giving Blue a trove of data about potential customers and demand. Yesterday, the second phase began, with the top bid revealed publicly on Blue Origin’s website. Finally, on June 12, there will be a live online auction to conclude the bidding.

The final price of this auction won’t be that indicative of the future: The first seat is something of a collector’s item and a historic moment, and the proceeds are going to a Blue-sponsored charity that promotes STEM education, which along with the auction dynamics will act to drive up the price. Blue also hasn’t revealed who the “rest of the crew” onboard will be and declined to say whether Bezos himself might be among them, but the prospect of flying alongside one of the world’s richest men, however remote, may also drive bidders.

Blue says it is planning several more passenger flights in 2021 after the debut mission, but hasn’t said how it will choose passengers or price the tickets. But with the data from this auction in hand, they will be closer to knowing what it might cost someone to rocket to space on demand a few years from now.

“Auctions are exciting and the sky is the limit,” Ariane Cornell, Blue’s director of astronaut sales, told reporters earlier this month. “We’ll be keeping our eyes on those bids as closely as you are.”

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IMAGERY INTERLUDE

Over the weekend, China became the second nation after the US to land and continuously operate a robot on the surface of Mars, releasing the first images snapped by its cameras on May 19.

An image taken on Mars by China's Tianwen-1 lander
Image copyright: CNSA

Now, its Zhurong rover will roll down that ramp and begin exploring the Red Planet, hunting for ice and performing geological analysis. European scientists have spotted evidence of subsurface water on Mars from orbit, but this Chinese rover and the US Perseverance rover that landed earlier this year have their own radar sensors that will attempt to gather better evidence close-up.

👀 Read this 👀

What good is a physical store these days, anyways? More than you might think. Quartz digs into the post-pandemic role of the retail space in this week’s field guide:

📍 Logistics hubs. Shoppers want to be able to buy an item online and pick it up at a nearby store, sometimes without having to get out of their car, or see an item in store and easily buy it online later—with fast shipping. It’s pushed retailers to stop treating e-commerce and stores as separate businesses with separate inventory and separate management systems.

🤳 Immersive brand experiences. While the store’s value as a point of sale is diminishing as more sales move online, experiential retail, where the store environment is an attraction in itself, is getting more important.

ℹ️  Touchpoints for existing customers. Stores are still vital places for shoppers to see and touch products firsthand, or to learn about an item or the brand behind it, even if they’re inclined to then leave and buy the item later online. In these cases, customer service, whether it’s answering questions or helping with returns, may be the primary role of the store, while selling stuff is secondary, changing the role of the sales associate.

🔭 Acquiring new customers. Stores create a “halo effect,” boosting a retailer’s web traffic and sales in the surrounding area.

Read more here.

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SPACE DEBRIS

China is flexing its space muscles. Besides Mars, China’s in business closer to home: In April, it launched the first module of the Tianhe space station, an orbital habitat that, when finished, will be about one-third the size of the International Space Station, capable of hosting astronauts 250 miles above the planet. This week, China will launch an uncrewed supply vehicle to Tianhe, where it will deliver propellant and supplies ahead of the real main event: In June, China is expected to send its first crew to the station. All told, it will take nine more launches to complete Tianhe, including the addition of two more modules, with initial construction expected to finish in 2022.

Waiting for Starlink. The Verge’s Nilay Patel has written a comprehensive review of consumer service provided by SpaceX’s Starlink satellite internet network, and the verdict is not great. The service worked, but speed varied considerably, and common obstructions like trees blocked the connection entirely at times. It’s worth noting that SpaceX still hasn’t launched all of its satellites to complete the network, which will make the odds of getting unobstructed service better, but the internet-from-space plan isn’t quite ready for primetime.

Rocket Loss. A May 15 launch by Rocket Lab failed after its flight computers detected an issue and shut down the engine on the vehicle’s second stage, the company said, resulting in the loss of two satellites built by the earth observation firm BlackSky. The company is investigating the issue and plans to return to flight soon; it quickly recovered from a previous failure in July 2020 caused by faulty wiring. Rocket Lab is currently in the process of going public through a SPAC transaction, which may see some complications with this failure. At press time, the price of shares in the acquiring SPAC, Vector, sat at $10, the price floor guaranteed to investors in the shell company.

Orbital cloud. A US Department of Defense pilot program to test the ability of cloud computing to share space data has proven successful, with Microsoft’s Azure processing streams of infrared sensor data five times faster than a Pentagon target.

Who Wants To Be An Astronaut? Discovery announced that it will produce a game show in 2022 with the grand prize being a trip to the International Space Station arranged by Axiom Space, now the leading broker of private human spaceflight. No word yet on the challenges themselves except that they will be grueling, so apply now!

Your pal,

Tim

This was issue 93 of our newsletter. Hope your week is out of this world! Please send your Blue Origin passenger flight predictions, Starlink reviews, tips, and informed opinions to tim@qz.com.

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