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Privatizing space exploration

Yesterday a Senate subcommittee, holding a hearing in Houston, heard testimony from people who advocated privatizing, at least to some degree, NASA’s space exploration programs. A Houston Chronicle article includes this passage:

So far, NASA’s Spirit and Opportunity robotic missions to Mars have produced a record 6 billion “hits” on the agency’s Web sites since early January. If only 5 percent of the Web site visits spurred the purchase of a $1 screen saver featuring an image of the Martian landscape, NASA would have earned $300 million.

This analysis, apparently provided by advertising executive Robert Lorsch, has some significant problems with it. The biggest problem is the confusion between “hits” and visitors: a hit is recorded each time a file (an HTML page as well as each of its components, be they images, Flash animations, style sheets, and the like) is downloaded. A single visitor can rack up hundreds of hits, depending on the number of pages he views and the number of files required for each page. As this Speedera press release from late January notes, NASA’s web sites had recorded a total of four billion hits through late January, but “only” 33 million unique visitors. (This makes sense when you think back to the six billion number above and recall that the total world population is only slightly larger than six billion.) Under the five-percent formula applied above, NASA would have grossed just $1.65 million through the end of January, and probably closer to $2.5 million by now. Moreover, transaction fees would have eaten away at a huge part of that revenue, because credit cards simply are inefficient for small purchases.

This doesn’t mean that privatizing at least some aspects of space exploration isn’t a good idea: there are some major roles the commercial sector could play, such as in the precusor lunar robotic missions planned for later this decade. However, the public and media have to be wary of promoting schemes that simply don’t make sense.

11 comments to Privatizing space exploration

  • Bill Turner

    Great comment, Jeff:

    “This makes sense when you think back to the six billion number above and recall that the total world population is only slightly larger than six billion.”

    It’s also worth noting that “only 5 percent” of 6 billion is 300 million. The total US population is about 300 million. It’s hard enough to get everyone in the US to vote, let alone buy a Mars screensaver.

    I agree with you that NASA should be getting some money from the popularity of the Mars rovers, but this guy’s figures are way off.

    Perhaps you could send your comments in a Letter to the Editor in the Houston Chronicle.

  • Dwayne A. Day

    Your analysis is right on the money. When O’Keefe testified before the House last week, I believe he said that those 6 billion hits constituted about 45 million unique visits (not visitors–there are repeat visits). That is roughly equivalent to the 4 billion hits, 33 million unique visits that you cite.

    You might check O’Keefe’s public testimony for this.

  • Brad DeMarco

    That was not the intent of the comment people! The point is that there is a very significant interest in the space program, regardless of the media portrayal, and a private program with financial obligations could be very profitable.

  • Dwayne A. Day

    I don’t understand Mr. DeMarco’s comment. Dr. Foust’s debunking of the numbers is accurate. And accuracy, not bad mathematics to support a philosophical belief, should be our goal.

  • Ken Murphy

    Transaction fees aren’t that bad, especially if you structure it properly. Credit cards are typically about 3%, Amex is 4% (maybe a little higher these days). Factoring in transaction handling fees and account costs you might lose up to 10% of every dollar at the outside, but it shouldn’t be more than that. If it is you’re in a bad deal. Government administrative overhead is another matter entirely.

    Sell the data at $5 per x-megabytes of data, in the spectrum of your choice (each additional spectrum costs extra). Make the visual spectrum picture screen saver $5 or $10 per copy downloaded. You’re really going to make your money from the bulk download of spectral data by universities and companies around the world.

    Data has value, today more than tomorrow. The financial industry thrives on useful data and Bloomberg terminals aren’t cheap. If the people around the world who are most interested in the subject want to pay a small processing fee to get at the spectra the more power to them. They help to offset the overall cost to the rest of us.

    Consumer Catalog, Pueblo, CO charges for some of its informational pamphlets. Maps from the USGS can cost money. Why not NASA for Mars data? The NSSDC does charge for datasets of Lunar Prospector and Clementine results, but I’ll bet they don’t sell many.

    Not for much in each individual transaction, but remember, candy bar companies make their money 75 cents at a time (retail).

    The transaction fees help to lubricate the transmission of larger amounts of money overall. No one likes them (except for us bankers), but what are you going to do? Keep giving everything away and quashing any hope for commercial enterprise? Or help to show the investment community that there is a case and money to be made from providing space data?

  • Jeff Foust

    Ken,

    The problem with credit card payments is not just the discount rate, which is only a few percent, but the transaction fees: a flat fee of anywhere from a dime to fifty cents per transaction, regardless of the amount. That’s not a big deal if your sales are in the $100 or even $10 range, but becomes a big issue in the one-dollar “micropayment” regime. Under a best-case scenario you’d still lose perhaps 15-20% of your revenue just in credit card fees alone. Apple’s iTunes Store seems to be handing $0.99 credit card transaction sales well, but that seems to be predicated on expectations that each user will buy multiple songs per transaction (rather than a single $1 screensaver), as this independent analysis shows: http://rentzsch.com/notes/creditCardMicropayments

    Regarding selling data: the question here is who would buy data from the Mars rovers (or similar robotic missions). The university researchers most interested in the data are primarily funded by NASA itself, or the NSF, so the government could be paying itself for these data. There are very few privately-funded planetary scientists, and few other private organizations interested in paying to analyzing Mars rover data.

    The economics do become different if you’re talking about a private venture: you might be able to make the case for government data purchase of data. NASA could then become an anchor tenant, helping pay for a private mission that would also be funded by other commercial products, such as what TransOrbital is trying to do with its Trailblazer lunar orbiter. Whether you can get such a business plan to close, though, depends on how much it would cost to provide the data NASA in particular would be interested in, and how much the agency would be willing to pay for it.

  • Jeff Foust

    Regarding web site statistics: As Dwayne Day mentioned, O’Keefe mentioned both hits and visitors in his February 12 testimony before the House Science Committee: 6 billion hits and 47 million unique visitors, according to page 14 of the transcript: http://www.nasa.gov/pdf/55862main_ok_house_hearing_transcript.pdf

    I’d also note that Alan Boyle, in his Cosmic Log weblog for MSNBC, used a figure of 50 million unique visitors on Friday in his discussion of a NASA press release that noted that the hit count for the NASA web sites has now exceeded 6.5 billion: http://msnbc.msn.com/id/4274407/#040220a (Alan was kind enough to include a link to this weblog in his entry.)

    While unique visitors is a far better metric than hits, it still doesn’t mean 47 or 50 million people have visited the site. I’ve visited the Mars rover sites from multiple computers at home and work, and each of those likely counts as a “unique visitor”, since there’s no way for them to know that the same person happens to use multiple machines. I imagine a number of people check the sites from home and work, so that would deflate the stats to some degree, although probably not by a large amount.

    So, if you have, say, 45 million people visiting the sites, and convince 5% of them to buy a screensaver, you get $2.25 million, or about $1.9 million after taking (modest) credit card transaction fees into account. $1.9 million won’t go very far towards funding missions to the Moon or Mars of any flavor, I’m afraid.

  • Dwayne A. Day

    Jeff beat me to the comment about who pays for the data. It is important to keep in mind that most space science has little commercial value and is therefore performed by those who are somehow subsidized by the government. Charging them for the data in many ways only increases government inefficiency, because even though government money eventually (partially) comes back to the government, there are always transaction costs–it’s like losing a certain amount of energy in an engine due to friction. The money they’re spending on paperwork is lost.

    Generally the more “free marketer” people argue that the government should become a data purchaser rather than a provider. This moves the production of data to a theoretically more efficient entity–the private sector.

    While this idea has merit in some areas, there are undoubtedly limits to it. Not all government needs can be left to the free market (we don’t hire mercenary armies, for instance). The problem in space seems to be that capital costs are so high that it’s hard for firms to simply step up to compete and provide services. They require some kind of guarantee that they’re not going to get bankrupted by competing.

  • ken murphy

    “The university researchers most interested in the data are primarily funded by NASA itself, or the NSF, so the government could be paying itself for these data. There are very few privately-funded planetary scientists, and few other private organizations interested in paying to analyzing Mars rover data.”

    “Jeff beat me to the comment about who pays for the data. It is important to keep in mind that most space science has little commercial value and is therefore performed by those who are somehow subsidized by the government.”

    What about universities in Europe?
    What about universities in South America?
    What about universities in Asia?
    What about universities in Australia?
    What about universities in the Middle East?
    What about universities in Africa?

    What about inter-governmental organizations, non-governmental organizations, not-for-profit organizations, think tanks, mining companies, research foundations, educational initiatives, visual artists, and so forth? How can anyone presume to foretell how that stuff may end up being used and by whom?

    Don’t close your mind to the potential customers. The point is to tap into as many cash flows as possible. What about the club DJ that wants to have some video cuts of Mars in different spectra? Any university in the WORLD with an astronomy program might be interested in a few gigabytes of data to use in a lab exercise. The UN may decide to underwrite a program that incorporates a few megabytes of direct data into an educational package. Different companies may want to put together a calendar of cool Mars pictures.

    There’s no way of telling until you actually set something up either directly at NASA or a real time data source tap paid for by a private company which then distributes it over the internet. Set it up to sell it by spectra in however many megabytes you want or can afford. When your margins are eaten up by fees and low prices you have to trade margin for volume.

    The point isn’t necessarily to pay for the entire mission. If the space community will only allow home runs then it’s going to be a very restricted commercial environment for a long time. The mission is already paid for, this stuff would just be cream off the top. Why would anyone leave a couple million, or tens of millions of dollars in relatively easy cash flow on the table? That can help to pay a lot of salary expense.

    You want more public support for the space program? Make it relatively easy for them to get the stuff they want, be it $5 screensavers that update automatically over the internet, or spectral data for an entrepreneur that wants to design a Martian resource study or extractor mechanism in anticipation of greater activity in that area in the future. Actually doing something like this, right now, helps to provide data points for the financial industry and commercial community to start building business models and cases for investment in the future.

    Space is not just about science. If the space community doesn’t start showing itself to be more amicable to commercial endeavors, offering suggestions instead of casting aspersions, then it’s never going to get very far. Not every commercial attempt is going to be the magic bullet that solves the whole problem and miraculously pays for everything. It’s lots of small things like beef jerky, and talking picture frames, and stamps cancelled on the station and small bags of regolith sold to wealthy Japanese industrialists for their gardens, and all kinds of other, small unimaginable ideas that bring more and more people into the fold of space-related business, thereby ensuring its greater prosperity in the future.

    Lots and lots of little seedlings, a few of whom grow up into mighty oaks.

  • ken anthony

    Only two comments:

    1) I’d like a chance to sell anything to 33 million people.

    2) I’ve already paid for the Mars pictures… it’s called taxes folks, and those pictures belong to me. I’m happy to share them with the rest of the world however.

  • AWFlynn

    My first posting to this blog:
    I join everyone in their excitement for the Mars program. I am 28 and have enjoyed the success of NASA’s projects since the SST program began. I for one encourage the unlimited tax funding for any program that the SCIENTISTS deem necessary.
    After reading the President’s budget guidelines I am concerned that the underfunding of the space telescope program will slow the ever expanding demand from the public and students for new pictures and insights. I think the dream of interstellar travel is within our grasp and all we have to do is reach out with our inventive nature and common sense.
    The President’s budget however seems to indicate a growing focus (over 10 years) towards what I see as becoming either an orbiting array of increasingly sophisticated intelligence equipment, or an orbiting array of “missle killers.” Of course I think we can agree that defense is very important but I belive that the indications shown in the budget only serve to reinforce an ideology of a militaristic and isolationist government.
    The stuff that NASA and JPL and all the other great companies involved is beyond compare. Technology advancement and a social responsibilty is evident within the scope of their missions. However, I feel that the scientific and exploration areas of NASA might soon follow in a symbolic path behind the NEA, Social Security, NCLB, and all the other great ideas that were finally underfunded into near obscurity. Science, art, education, government policy, and capital, go hand-in-hand. Without either one we couldn’t have any of them.
    So, in closing, thanks to everyone involved in the programs, for their efforts and hard work in keeping the interest and adventure alive. Please remind your people that we, the race of man, has already been Enlightened through history, already been to the moon, and already witnessed the edge of the universe. I want to see the next one, we all do.
    Question: Will a base of ops on the moon get us any closer to a remedy for efficient space travel? Or are we just setting up a conference room for Earthling-Alien Board Meetings?