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\[This article has zero AI. This is a companion piece to my other article that got 1 million views here - thank you so much!🥳\]
**Launch Commoditization Doesn't Exist, and May Never.**
Launch commoditization is a term that has been thrown around a lot recently, generally as a bear case against launch providers ($RKLB, $X, $FLY). I don't personally buy into the launch commoditization narrative for two reasons:
1. Launch is not fungible
2. In a duopoly or oligopoly, there is no incentive to lower prices
For commoditization to emerge would require multiple, scaled and profitable players within each market segment. I doubt we get there in <10 years, if at all. Since I wrote this article a few days ago; numerous industry analyst have come out with the same message.
Let's dig in a little deeper.
**Rockets Are Not Commodities**
Copper is a commodity because it is fungible. Any piece of .999 fine copper is identical regardless of where it came from, who supplied it, etc. Assuming the seller is honest about the purity, copper is copper, and the cheapest copper will do. Mesopotamian merchants be damned.
Rockets or launch are not fungible. Launch varies by payload class, orbit, schedule flexibility, reliability, contract eligibility, insurance cost, etc.
Clearly launch is not a commodity in the true sense of the word.
Is it similar to a commodity then?
The closest analogy would be the trucking industry. For all intents and purposes trucking is a priced as a commodity. If you have ever shipped anything large, like a car, across country, you'll know you can choose from thousands of providers that compete solely on price.
This is possible because there are \~50,000 trucking companies in the US (Companies with over 5 trucks. More than 10x that including owner-operators). These trucking companies all use the same trucks from a small number of vendors, run the same routes, abide by the same legal restrictions, have the same maintenance costs, the same staffing costs, etc.
There are not thousands, hundreds, or even tens of launch companies operating in the same segment.
What Would It Take for Launch to Be In a Comparable Position?
Before launch can commoditize you will need:
1. Multiple players; lets say at least 3 (but more like 5+)
2. Offering comparable services
3. That are scaled (10+ successful launches)
4. That have capacity
5. That are profitable
Lets highlight the importance of each line item:
1. Multiple players is self explanatory. No competition = no pricing pressure.
2. Comparable services means similar payload capacity with similar schedule availability and the capability to reach the same orbits.
3. Rockets that have not scaled yet come with a different risk profile. Higher insurance costs means the total cost might be much higher than the list price. Why pay for an unproven launch if a proven one is available? Maybe you pay less, but at what cost?
4. It's no good having a launch provider if they have 4+ years of backlog when you need to launch in 1-2 years.
5. It's easy to undercut on price in the short-term. Rocket Lab did this with Electron and regretted it. They won't make the same mistake with Neutron. Relativity Space is rumored to have secured their large backlog by offering low price deals on very flexible terms. This works short term, but long term, companies will either have to raise prices or go out of business.
Lets stress test each point against todays market reality within each segment.
**Dedicated Small launch:**
Scaled, profitable launch providers with capacity: 1 - Rocket Lab.
Potential new entrants:
* Astra
* Firefly
* Gilmour Space
* Isar Aerospace
Many more than have already failed or left:
* Relativity Space - Terran 1, cancelled.
* ABL - RS1, cancelled.
* Virgin Orbit - LauncherOne, bankrupt.
* Astra - Rocket 3, cancelled and bankrupted.
Rocket Lab is currently the sole provider in their market segment and has pricing power. Can that change? Yes. Will it? Remains to be seen but the odds don't look good.
How long will investors continue to fund companies with such a low probability of success? ABL already pivoted to military. Astra seems to be trying the same.
Can those that succeed technically, become viable, long term profitable businesses?
There is no evidence that Rocket Lab is under pricing pressure or is likely to be in the future. In fact, Electron prices have risen from $7.5M to $8.2M over the last few years.
**Medium & Heavy Launch:**
This is where things look a lot more competitive; however the number of scaled, profitable launch providers with capacity is still arguably only one today - Falcon 9. In the near future, will medium and heavy launch each reach 3 or more scaled players with heritage and capacity?
Ariane 6 has 30+ flights in their backlog and did 4 launches in 2025. With their 2nd launch of 2026 planned for tomorrow (April 28) they're on pace for 6 launches in 2026 - that's 5 years to clear the existing backlog and they just had to go through a restructuring after being technically bankrupt as of end 2025.
Vulcan Centaur is in an ever worse position with 70 launches in backlog and only 4 launches in 3 years. The rocket is currently grounded following 2 SRB anomalies and the Space Force has moved launches over to Falcon 9.
Blue Origin is in a similar position with a healthy backlog but a shaky, albeit impressive, start to their launch campaign. 1 in 3 failures for a new vehicle is okay, if it becomes 2 in 4 things shift.
**The bottom line for the heavy launch segment** is companies struggling to execute. Cutting prices in a race to the bottom does nothing to help any of these launch providers when their challenge is technical execution, not lack of demand.
Firefly, Relativity Space, Stoke, and Rocket Lab are hoping to bring their medium lift vehicles Eclipse, Terran R, Nova, and Neutron to market, respectively. These are all coming up against the Falcon 9.
Let's assume 2 out of 4 make it to commercial scale, giving us Flacon 9 and two of the upcoming new medium lift launch vehicles.
What incentive is there to cut prices in a race to the bottom? Throughout history oligopolies drive prices higher, not lower - Why? Game theory. If one cuts prices, the other two will have to cut prices to match, this hurts everyone, and since everyone is aware of this, no one wants to cut. Why cut prices when you can maintain you existing price level.
You can try to undercut the competition to put them out of business. This favors companies with strong capital efficiency, see SpaceX and Rocket Lab. Even then, given the technical risks companies face, better to let the competition put themselves out of business through poor execution.
**The Bottom Line**
We do not have the market conditions for commoditized pricing to emerge. Even if we get, there is no incentive for a race to the bottom. It's proven game theory.
**The Elephants in the Room - Starship/Rideshare/Space Tugs**
There is no doubt that for large payloads launched on Starship the cost per KG will be lower than say, Falcon 9. That's simple economies of scale and great news for those that need it.
Space tugs and rideshare show up here too - but space tugs are added cost, added risk, and schedules are still tied to rideshare availability. Peter Beck says the math doesn't work. Impulse Space and True Anomaly obviously see a market there. As yet, it's unproven and costs are an unknown. What we do know is it means a second vehicle and a second operator, greatly changing the risk profile of the mission.
Peter Beck has pointed out that rideshare is useful to a point but that it actually drives demand for dedicated launch - proving the two services are again, not fungible. He highlights three customers that started launching their demo satellites on Falcon 9 rideshare before moving to dedicated launch with Rocket Lab. The companies are Kinéis, IQPS, and Synspective.
**Summary**
The market conditions required for commoditized pricing to emerge simply do not exists today and to exist in future will require a level of success that the industry simply has never delivered on.
For the companies that do make it, there is no incentive to cut prices in a race to the bottom. Launch costs for dedicated launch on Falcon 9 and Electron - the two most frequently launched vehicles in the world (ex-China) - have risen over time, not fallen.
Maybe in 20 years the world will look different, but for the decade ahead, I won't be making investment decisions reliant on falling launch costs.
**\*\*\* Evidence from industry analysts \*\*\***
April 28, Impulse Space, COO, Eric Romo, strongly echoed my sentiments live on NYSE Space & Defense Special. Eric was SpaceX employee #13 and at Impulse Space he stands to benefit from falling launch costs, yet his bias is rising costs. Here are the quotes:
*“Assuming that you’re going to crater the prices in the launch market because of Starship, I think, is a bad assumption in the near term. Long term maybe… but in the long term we’re all dead”*
*On Neutron, Terran R pushing prices down “I’m not so sure… I think pricing if anything is going to float upward…”*
*“... makes me nervous, any business plan that starts with like, when Starship enables 200KG price to LEO… I think is going to be hard in the near term…”*
Also April 28, Jack Kuhr, Director of Research at Payload Space had the following comments in an interview with Dave G Investing.
On Starship “What’s their incentive for launching customer payloads? Why would SpaceX even want to launch commercial payloads when their revenue from Starlink, xAI, and their own orbital datacenters is going to be so significant, that lower margin customer payloads might just be a nuisance for them”
On Falcon 9 pricing “They’re up 40% in 5 years… they are increasing pricing which is great for Rocket Lab & Firefly".
\*\*\*\*\*
Long $RKLB
Positions:
3,680 RKLB Shares
69x Jan 28 $75 Calls