March 19th, 2003

Business on Board; NASA Shifts Strategy For Selling Outer Space

By Ariana Eunjung Cha
Washington Post

The shuttle Columbia’s final mission was not just one of science,
but of commerce. Among the 80-plus experiments it carried was one for International
Flavors & Fragrances Inc. The private company had placed on board two flowers,
a miniature rose and an Asian rice plant, in the hopes that the low gravity
on the ship would morph their scents into something unusual that could be used
in perfumes, soaps and other consumer products.

STS-107 was supposed to be a showcase for the kinds of commercialization efforts
NASA hoped to undertake in the future. Most shuttle flights in recent years
have been reserved for delivering parts and supplies to the space station and
serving other government space programs. Columbia carried six experiments for
industry as part of a wide-ranging campaign to stir new interest among business.

NASA once had high hopes for commercializing the space program. The agency
signed contracts with toymaker Lego Co. to run a contest to name the new twin
Mars rovers, and it entered a deal with an upstart called Dreamtime to produce
super-clear high-definition TV broadcasts from the shuttle fleet and space station.
There even was talk about a hotel in space, orbiting billboards, and shuttles
being rented to Hollywood filmmakers.

But the market for space never fully materialized, and NASA was in the midst
of reevaluating its strategy even before the shuttle disintegrated in the skies
over Texas on Feb. 1. The tragedy is likely to escalate the debate about the
merits of such public-private partnerships, particularly since much of the commercial
interest was predicated on the notion that space travel is fun, exciting—
and implicitly safe.

"NASA has become overly focused with trying to demonstrate practical,
commercial benefits of space flight," said John E. Pike, director of advisory
firm, who over the past two decades has served as a consultant
for and participant on numerous space-related boards, including some for the
U.S. government and the United Nations. "The space program should be about
boldly going where no one has gone before—not about advertising opportunities."

The evolution of "NASA Inc.," as some call it, has brought profound
changes to a government agency once known as insular and bureaucratic. NASA’s
commercialization efforts include research centers that try to help develop
agency-funded research for use in commercial products, collaborations on education
and outreach activities, and privatization efforts to contract out services
such as shuttle maintenance. Contractors for private companies now outnumber
civil servants 2 to 1 at NASA.

NASA officials say privatization has cut costs and increased efficiency, an
achievement that both insiders and outsiders have argued may have kept the agency
viable during recent rounds of cutbacks. They also brag that some partnerships
have resulted in more than 1,300 "spinoff" commercial products ranging
from shock-absorbing sports bras and disease-free seed potatoes to more efficient
heart pumps. It’s too early, the agency says, to expect the kind of blockbuster
breakthroughs that some are demanding.

"There’s a long life cycle from the investment in basic research, the
time you hit the market and when something becomes a successful product,"
said Lance B. Bush, the commercial development manager for NASA’s international
space station.

But critics argue that commercialization efforts are inherently problematic,
that NASA’s private partners have a financial incentive to place the economic
potential of products over their innovativeness. They say that much of the research
conducted in space can be done just as well on Earth, and that the projects
are only on the shuttle or space station for their promotional value.

"What our country does in space is a direct expression of what we really
are; and to sell advertising and peddle entertainment products in space is to
confirm the most cynical view of ourselves," Gary Ruskin, executive director
of the watchdog group Commercial Alert, wrote in a letter to NASA administrators.

Help vs. Hype

NASA has dabbled in commercialization efforts since its inception, but it wasn’t
until the 1990s that the agency made it a top priority. Then-administrator Daniel
S. Goldin believed that partnering with private industry was the answer to the
agency’s money and efficiency problems. He introduced a massive commercialization
program that took to the limit the restrictions imposed after the 1986 Challenger
explosion—which prohibited NASA from using the shuttle for missions that
did not require the unique characteristics of the orbiter.

The agency mandated that 30 percent of the new international space station
be set aside for commercial use. There were discussions with McDonald’s Corp.
and Coca-Cola Co. about providing food and advertising for the orbiting laboratory.
The agency also drafted rules for entertaining visitors there. And there was
some talk about selling one of NASA’s spacecraft—the oldest, Columbia—
and of earmarking at least two shuttle flights a year for businesses.

The collapse of the stock market in 2001 took with it many fledgling space
industry companies and, as a consequence, derailed NASA’s plans. The agency
did manage to hand over day-to-day operations of the shuttle to a company called
United Space Alliance, but many other ideas remain fantasy today. For instance,
the Dreamtime deal, which was supposed to result in high-resolution images from
space that could be sold to consumers, fell apart after the company couldn’t
meet its obligations.

Sean O’Keefe, who became NASA administrator two years ago, acknowledged in
a recent interview with Washington Post editors and reporters that some of commercialization’s
early promise has failed to materialize. But commercialization is not dead.
O’Keefe now pushes the idea that NASA should focus its resources more on projects
that could help the agency rather than on those that simply promote the space

It is a significant philosophical shift, O’Keefe’s deputy chief of staff, Scott
Pace, said this week.

"Space commercialization and industrialization is neat. It’s important.
It’s in the government’s best interest," Pace said. "But it’s something
that industry does. It’s not something that government does. . . . We are not
working to duplicate industry."

To that end, next year NASA will stop its financial support of six regional
research centers that were supposed to encourage industry and academia to work
with the agency on new products. Instead it will funnel some of that money into
facilitating "technology transfer" to encourage private industry to
develop NASA’s basic research into commercial products. Funding for the commercial
technology division was slashed from $29.8 million in 2003 to $11.5 million
in 2004, while money for technology transfers was increased from $5.8 million
in 2003 to $26.4 million in 2004.

The Bush administration also has trimmed from $38 million to $31 million the
2004 budget for the Space Product Development Program, which financed the experiments
on board Columbia, calling the effort mostly "promotional." NASA officials
say they are still discussing how to re-prioritize the program.

NASA officials emphasize that the changes do not mean the agency is any less
committed to commercialization, but rather that it is taking a different approach
to achieving its goals. In its 2003 Strategic Plan, NASA calls low-earth orbit
"a rapid-growth economic zone" and says it "remains convinced
that it is essential to pioneer and help commercialize new areas of space activity."

Meanwhile, NASA is studying the Russian commercialization program, an effort
it once ridiculed, for ideas about what it is—and is not—comfortable doing.

"What Russia has done is open up the market so that now this is a real
market, whereas before it was still a thing of the distant future," said
Marco Caceres, an analyst with the Teal Group, an aerospace research firm.

In contrast to the cautious manner in which NASA approached its relationships
with industry, the cash-strapped Russian space agency embraced commercialization
with such gusto that its space program became known as "rockets for rubles."

In 2001, the Russians ferried American tycoon Dennis Tito to the space station
for $20 million. Next came South African tycoon Mark Shuttleworth. They’ve allowed
Pizza Hut crispy-crust pies, RadioShack talking photo frames and Popular Mechanics
magazines to be delivered to the station.

They also signed an agreement with Mark Burnett, creator of the TV show "Survivor,"
to create a new reality show. Contestants on what was tentatively called "Destination
Space" were to train at Star City, Russia’s equivalent of the Houston training
center. Former astronauts and military and space officials would vote off one
person each week. The winner was to get a trip to the space station.

But within a few days of Columbia’s explosion, Russia announced it would halt
plans to ship tourists into space; with the American space shuttle fleet grounded,
the Russian capsules are now the only regular link to the space station. It’s
unclear when or even if the space tourist program will resume.

The Value of Research

It’s difficult to quantify NASA’s investment in commercialization and to track
its effects. In 2001, the agency spent roughly $135 million on its commercial
technology division and received $48.1 million in investments and fees from
its 160-plus corporate partners. But the expenditures don’t take into account
commercialization efforts run out of other NASA departments, nor do they include
lent office and lab space or staff time.

The most optimistic estimates about the impact of NASA on industry say the
returns on investment from one shuttle flight may be six times as great. But
on the other end of the spectrum are assessments by people such as industry
analyst Pike of, who argues that conducting research on the
shuttle or space station is inherently a money-losing endeavor.

"You are basically talking about something earning millions of dollars
of profit off of billions of dollars of taxpayer investment. . . . You are not
going to recuperate anything remotely resembling the full cost," Pike said.

Among the most contentious aspects of commercialization are the value of science
experiments on the shuttle and space station.

NASA justifies its expenditures in part by saying experiments that take advantage
of the microgravity of orbiters might one day lead to scientific breakthroughs
such as a cure for cancer, AIDS or other devastating diseases. The agency has
made it a priority to assign space on the international space station to companies
doing medical work. Among the first companies that will have access to the laboratories,
for instance, will be Baltimore-based StelSys LLC, which reportedly paid around
$225,000 to test liver disease treatments.

Some prominent scientists, however, question the notion that space is preferable
to Earth for conducting most experiments.

"Anybody who believes that, I have a bridge to sell them," said Robert
L. Park, a University of Maryland professor of physics who in 1997 testified
before Congress about NASA’s research on behalf of the American Physical Society.
The American Society for Cell Biology has expressed similar sentiments.

The experiments aboard STS-107 serve as a flashpoint for this debate.

In addition to the flower test, Columbia carried a variety of kindergarten-through-12th-grade
student experiments. The shuttle crew also conducted an experiment for Commercial
Instrumentation Technology Associations on crystals in hopes of learning more
about the structure of a protein related to the spread of various cancers. Astronauts
tested a mist firefighting system for MicroCool Inc. and Fogco Systems Inc.,
and conducted a gene transfer experiment for soybeans for Producers’ Natural
Processing Inc.

The six companies that had experiments on STS-107’s 16-day mission paid for
their own hardware, as well as "a token" $20,000 to have their experiments
on board, said Mark Nall, manager of NASA’s Space Product Development Program.
The actual price tag to take up something weighing about 60 pounds for an experiment
on the shuttle is in the neighborhood of $1 million.

The University of Maryland’s Park calls some of these experiments "made-up

"The way this is often pitched to the scientific community is ‘We are
going to be up there in space, so what should we do there?’ . . . It’s difficult
to justify this for the cost or risk to the crew," he said.

He accuses some companies—including International Flavors & Fragrances
—of having signed up to be part of NASA’s commercialization program not because
they are interested in the science, but for the promotional value. "To
believe they actually thought that there would be new essential oils blooming
in microgravity—that’s a real stretch," Park said.

International Flavors & Fragrances declined to comment, except to say it
hopes to continue its relationship with NASA.

John M. Logsdon, director of the Space Policy Institute at George Washington
University, argued that it’s reasonable for experiments on the shuttle to be
judged not only for their scientific merit but also for their commercial value.

"It’s easy by picking the name of something to make fun of it, to question
whether it is a legitimate experiment," said Logsdon, who was recently
named to the Columbia investigation board. But there is "a ripe commercial
market for fragrances."

Researcher Richard S. Drezen in Washington contributed to this report.


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