Who Owns Your Rocket?

Rocket Shares: UR doin it rong

The Black Desert: Space Travel and Combat
Who Owns Your Rocket?

    Proofreading and art work continue on The Pumpkin-Suit's Manual, and I have no doubt that the extra time I'm taking to get it done will make for a much better, and much prettier book.  None of this extra time will slow down our March 16th release of Ships of the Black Desert:  The Alan B. Shepard-Interplanetary Vehicle, because much of the deckplans and other art is already done.  So, with much of the fun, creative stuff for both of the above projects either mapped out completely or at least underway, my fevered mind turns to ruminations on April's The Black Desert: Space Travel and Combat which will basically cover everything the Pumpkin-Suit's Manual doesn't, including the business of buying rockets when you're a dead broke starting Character.

    I wanted to visit this topic because, frankly, I think it's treated far too lightly in most of the SF I've seen and read.  The issue of buying a spacecraft, far and away the most expensive engineered artifacts for their size ever created by H. sapiens, is usually glossed over completely or at most treated as a transaction similar to buying a car.  Even the venerable Traveller RPG franchise, which prices spacecraft in Mega-Credits and provides rules for paying it off, treats this as a simple mortgage transaction with simple interest, and something that requires every PC spacecraft to be an aging wreck, a give-away from the Scout Service, or impossible to afford.  Not that this is a bad set of options - I rather like all of these ideas – but there are other ways to finance new rockets that even PCs could afford, if we use some options from history.

You're Financing a Rocket: Not a Car

    First of all, I would think that a spacecraft would at least, given it's cost, be on the order of buying an aircraft (hence the rocket repos article) but probably even more complicated, more on the order of building a clipper in the Age of Sail.  I am usually loathe to make Age of Sail analogies to spacecraft, for reasons that can be found here, but this isn't about the technology or tactics of sailboats, this is about their financing.  This link to the past through the pocket-book and not the rocket...ook.... is, in my opinion, a nice way to use the romantic era of the Yankee Clipper for a little flavor without making our SF physically impossible. 

    So anyway, rather than go into a long exposition about how they financed boats back in the day, let's cut to the chase and look at an example that will, hopefully, explain the system without boring anyone to death.

    For this example, let start with an AI named Annabelle Li.  Annie was a Ship's Officer/EW expert for Brazil during the war and retired with an honorable discharge in 2195, and worked for awhile as a shuttle pilot, traffic controller and other jobs that made her a lot of contacts and gave her the idea of going into business as a cargo rocket long enough to buy a spacecraft and at last have a permanent body again.  Annie puts together a list of people she knows and cross-references all of their personality and psychological data, finally arriving at a decent crew mix that won't kill each other and can perform well together in a crisis as well as during monotonous routine.  I imagine this crew selection step, an under-served part of most of the SF I've read (Stranger is a good example of what happens when the crew are too compatible) would be a big part of rocket crew selection in any realistic future, so don't skip it.

    So anyway, Annabelle and her friends/crew decide to go into business together and get a rocket.  This involves a bit of hanky, and maybe even some panky, as the question of who actually owns a rocket is as easy to answer as who “owns” a publicly traded corporation.

Old Business for New Rockets

    A modern, reusable, commercial command module (in this case, an Embraer knock-off) capable of lifting 250 tons to LEO costs about $24,000,000 fresh off the line at the Space Composites Assembly Facilities in Luverne Alabama, where the fabricated components from hundreds of small garage-shops are carefully inspected and integrated.  This new spacecraft was financed by selling shares to interested parties.  The relevant data are in Table 1:

Table 1: Rocket Shares and Financing

Rocket Financing	Cost
Avg. New	$24,000,000
Mortgage %	20%
Shares	64
Value/share	$375,000
Financier's	≈13
Owner of record	25
Other investors	24
F-COM	1
Crew	¼ of 1

    Like Ye Olde Shipps of Olde, a rocket is divided into 64 shares that are bought by banks, private investors, shipping companies, and even individuals if they can afford it.  The party with majority of the shares is the Owner of Record, and is usually a shipping concern looking to increase its slice of the space-imports pie.  They may have to get a loan from a bank, but instead of charging interest and demanding payments like usual, the bank is given 13 shares, or about 20% of the rocket's value.  The bank likes this arrangement, because it can trade, sell or award the shares as they see fit, and those shares will earn money as long as the rocket is in commission.

    With me so far?

    So our intrepid crew, led by Annabelle Li, approach a shipping company   and apply for a position on a profit-share payment schedule instead of regular salary.  The Shipping company prefers this arraignment for crew and requires a profit-share with Flight Commanders, as an incentive to work hard.   Annabelle and the crew sign what is known as a Spaceframe Charter, which makes Annie and the crew employees of the company for two years.  In exchange, ownership of 2 shares of the rocket (henceforth also known as Annabelle Li) are assigned to the the spacers, one for Annie as F-COM, and one for the crew, meaning they each get a quarter-share of the profits from the rocket's business.


The (Twice) Daily Grind

    Just what is this business, you may ask?  In our look at Space Infrastructure awhile back I described a set-up where these little Liberty Bell rockets (Annabelle Li is the Brazilian equivalent) schlep cargo up to a commercial hub in orbit for trans-shipment to the moon or interplanetary vehicle.  This kind of work involves two flights a day, six days a week, for 50 weeks out of the year.  The two-week's vacation time is a federal requirement; all spacecraft must have a bi-annual, week-long overhaul in order to keep their licenses.

    In the holds of these little freighters, there may be tons of dairy products from Terra (something even Mars can't make yet) that cost $12.00/kg before shipping and sell for twice that in space.  There may be small consignments of hafnium, platinum-group metals, or even helium from the Aldrin Node that sell for tens of thousands per kilo on Terra.  My point is, it doesn't matter, because Annie and her crew will never see a dime of the treasure in their holds – it belongs to whoever hired the shipping company to transport it.  The shipping company charges anywhere from a 5-15 cents a kilogram to haul the stuff, on top of the ten bucks/kg it takes to put anything into space, and this amount is the sole profit made by the rocket on a trip.     How much profit is that?  Let's take a look at the second table to find out:

Table 2: Rocket Profit and Expenses

Rocket Daily Expenses:	Cost:
Launch	$100,000
Inspection	$60,000
Vehicle Assembly	$100,000
Propellant	$210,000
Battery Charge	$10,500
Hanger	$8,333
Certifications	$33
Consumables	$460
Crew Salaries (if any)	$500
Orbital Docking	$400,000
Orbital Fueling	$4,202,000
Mortgage	$2,740
Total:	$5,089,840
Gross Cost/kg:	$10.17
Avg. Shipping Cost/kg:	≈ 0.10
Profit:	$50,000

    As you can see, It takes a lot of scratch to get a rocket into orbit at all – even in a setting that is as space-friendly as The Black Desert.  Orbital re-fueling is, of course, the largest expense, because every drop of that methane or LH2/LOX must be hauled into orbit by a tanker, which itself must pay for every expense on the list, with the exception of the refueling cost.  Tankers don't carry cargo back to Terra from orbit, so they can land using only the ambient atmosphere and their L-Drive.  Even with this savings, The orbital depots that accept shipment of the juice must be maintained and have their own expenses, so the “cost at the pump” is still way up there. 
    The table shows that the break-even cost of shipping into orbit, minus profit, is $10.17.  This is, however, not the usual price of doing business, as any shipping company worth it's charters will use discounts, bonuses, bulk rates and whatever other tricks it can think of to keep the price lower than its competitors. This is why, like in the real world, privately owned freighters are at a disadvantage, because they can't afford to post shipping rates under cost.  They get by with razor thin profits – sometimes only a couple of cents a kilo – in order to make up for this.  The only ways a independent trader can get a decent amount of business is to find a niche that isn't served by the big companies, such as offering transport to orbital hotels, smaller stations, or resupply of corporate/ military assets away from the central hub.  Independent merchants can expect to have to push themselves and their rockets to the limit in order clear expenses and keep the majority shareholder – the bank – from calling the repo men.

Ownership is a Many-Splendoréd Thing

    All that being said, a Corporate-owned rocket is still, in the eyes of the law, practically yours anyway.  This is because of legal mumbo-jumbo meant to screw the Captain of a rocket, but also giving said Captain some very important rights that a savvy F-COM can use to their advantage.
   
    It's like this: There are many legal types of ownership, and just about all of them will be used in this rocket scenario.  There is owner-of-title, or record, which is the majority shareholder in the rocket.  This is usually the shipping company we've already mentioned, but it doesn't have to be.  There are also owners-of-possession, which is precisely what the F-COM of a rocket is.  The owner-of-possession has at least one share of the rocket, and receive all dividends and bonuses from that share to use as they wish.  In exchange, all liability is on them, and all responsibility to the other shareholders.  This means that the F-COM is at fault for any damages, delays or other issues that result in a loss of profit for the rest of the shareholders.  While only getting one-sixty-fourth of the profits, the F-COM gets 100% of the responsibility, the only exceptions being whatever deals the shipping can make in the rocket's favor that are in their best interests, as the ones who get all the cash.   The last type of owner, the owner-of-benefit, isn't really an owner at all but a group of people that split up the profits of one or more shares, like the rest of the crew.

All this could be yours...after about 14 years.

Kind of Like Rent-to-Own, but Not Really


    So why, you may ask, would an F-COM accept this kind of headache in exchange for one lousy share?  For one thing, the share is free.  As we can see in Table 2 above, a single share costs three hundred and seventy-five thousand, which is beyond the buying power of the average Terran citizen.  In fact, at a median income of just 20,000 annually, one rocket share represents nearly eighteen years of earnings, with no money left over to live on.  Needless to say, this is all but impossible for the average Terran.   If that citizen is an F-COM, however, they stand to make almost a quarter-million a year.  Even the crew of a rocket, if they choose to enter into a profit-share contract, can make nearly three times a Terran's median income.

Table 3: Profits per Share

Earning Potential
Avg. Daily Profit/Share	$781
Annual Operation Days	300
Avg. Annual Profit/Share	$234,300
F-COM Earnings	$234,300
Crew Earnings	$58,575

  

    As with all business deals, there are caveats that the F-COM must be aware of.  For one thing, the contract for an F-COM is typically two years long, in exchange for one share.  For that two-year period, this means that the Shipping company get pretty much five months free labor from the skippers of their rockets.  Even with this hefty tariff on their share, in order to be liable for the rocket, the F-COM must be a titled co-owner as well as owner-of-possession.  So after the two year contract, that single share is theirs; they could retire and still make six-figures a year in dividends.

    Most F-COMs do not retire.  For one thing, space gets into your head; ask any astronaut and they'll tell you.  For another, An F-COM in good standing can re-up their contract and earn a second share over two years, taken from the bank's thirteen as payment of the mortgage.  The Shipping Company will continue to have the majority, but as the number of shares builds up, so do the profits and an F-COM interested in owning their rocket outright can keep buying shares.  After their second contract, they have two shares; after their third, they can have four, and they own eight shares after the fourth.  By the time an F-COM has been with the company for ten years, the bank is paid off and the F-COM owns 16 shares.  After a twelve-year tenure, the F-COM has half the shares of the rocket and is no longer the minority shareholder.  One more contract, and the rocket is theirs outright, with just over half of its operational life left.   The shipping company, of course, uses part of the F-COMs payout to buy another rocket, and the cycle begins again.  Smart F-COMs sell shares to their crew, this gives them a vested interest in the rocket and also spreads the liability around a bit.  The crew starts making as much as a first-contract F-COM, and they in turn can buy more shares in the rocket from their boss, or start buying shares on their own rockets.  New shipping companies can start this way, with one loyal crew and a lot of dedication.

    I hope you've found this exploration into the economics of rocket ownership as fascinating as I have; it's this kind of speculation that breeds the really good adventure ideas for games and gives a party of PCs a way to own their own ship without dealing directly with the bank, or with a Jabba analog. 

    Remember, comments are always welcome.  See you later, RocketFans!