The success of Starlink is more than just one company, it’s having a profound impact on the space economy as a whole. According to a recent report from the U.S. Department of Commerce’s Bureau of Economic Analysis (BEA), the U.S. space economy was valued at $131.8 billion in 2022, accounting for 0.5% of GDP, and a significant portion of that was due to private space companies.
What’s particularly noteworthy is the growth rate of the space economy. In 2022, the space economy had a real GDP growth rate of 2.3%, outpacing the overall economy’s growth rate of 1.9%. This shows that the space industry is becoming a new growth engine for the US economy.
The recent rise of private space companies, including Starlink, appears to be reversing this trend. In fact, in 2022, real output growth in the space manufacturing sector significantly outpaced the overall space economy growth rate.
From an investor’s perspective, Starlink’s potential is enormous. According to Quilty Space’s analysis, Starlink is expected to generate $6.6 billion in revenue in 2024. That’s an 80% year-over-year growth. What’s even more impressive is that it’s expected to turn profitable for the first time in 2024.
Starlink as a platform: economic value analysis
- Basic revenue model.
- Current revenue: $11.8 billion projected by 2025
- Average revenue per subscriber (ARPU): $239.88
- Projected subscribers: 8-10 million by 2025
- Platform Scalability
- IoT services market: $1.6 trillion by 2025
- Autonomous vehicle connectivity market: $80 billion by 2030
- Space tourism data services: $30 billion market by 2027
But that’s just the beginning.
The economic impact of Starlink is likely to be even greater:
- Bridging the digital divide: According to a World Bank study, for every 10% increase in broadband penetration, GDP in developing countries grows by 1.38%. If Starlink can increase internet penetration globally, the economic impact will be unimaginable.
- Creating a new industry ecosystem: New services and applications will emerge based on Starlink, which will spur innovation in many fields, not just the space industry.
- Increased productivity: High-speed internet access will enable remote work, online education, and more, increasing overall productivity.
- Expanding global markets: Small and medium-sized businesses will be able to easily access global markets, boosting international trade. Economists estimate that these effects could add $1 trillion to the global economy by 2030.
Analyzing Starlink’s business model from an economic perspective, several interesting features emerge:
- Network effects: As the number of Starlink users increases, the value of the platform grows exponentially. This can be described as “Metcalfe’s Law”. The theory states that the value of a network is proportional to the square of the number of users.
- Economies of scale: Starlink requires a huge investment initially, but once established, the cost of accommodating additional users becomes very low. This enables high profitability in the long run.
- Economies of scope: Starlink can offer a wide range of ancillary services in addition to internet services. This allows for greater cost efficiency and diversification of revenue streams.
- Monopolistic competition: Starlink currently holds a leading position in the space-based internet market. This provides a kind of “first-mover advantage” and can strengthen its market power in the long run.
- Externality: Starlink’s services have positive externalities, meaning that an individual’s use of the internet contributes to the digital literacy and economic development of society as a whole. These economic characteristics suggest that Starlink has a sustainable business model.
So how can investors participate in Starlink’s growth? Currently, Starlink is privately held, so direct investment is difficult. However, there are several indirect ways to invest in Starlink
- Buy a stake in SpaceX: It is possible to buy a stake in SpaceX in some private markets. However, this is only an option for high net worth individuals.
- Invest in the ARK Space Exploration ETF (ARKX): This ETF, run by Cash Wood’s ARK Invest, invests in the space industry and includes a stake in SpaceX.
- Buy Alphabet (GOOGL) stock: Google’s parent company, Alphabet, is one of SpaceX’s major investors.
- Buy Tesla (TSLA) stock: Elon Musk has said that Tesla shareholders could be given priority in a future Starlink IPO.
It’s not just about providing high-speed internet, it has the potential to become a global platform connected to a range of digital services. Starlink’s innovative economic model raises important questions about how we prepare for the future.
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