Satellites come in all shapes and sizes, from the 6.2-ton James Webb Space Telescope with its 21-foot-diameter mirror and sunshade the size of a tennis court (fully extended), all the way down to tiny cube-sats that measure just a few inches on a side. So too, the rockets that launch them.

Some are big, such as SpaceX's Falcon Heavy. And others are quite small, such as Rocket Lab's (RKLB 3.29%) Electron -- which makes perfect sense. You don't need a giant megarocket to launch some of the smaller satellites orbiting Earth these days. And this is in fact why companies like Rocket Lab, Relativity Space, and ABL Space Systems developed small rockets in the first place.

That doesn't mean that these companies are all going to survive, however.

Beware SpaceX: Destroyer of profit margins

In fact, as far back as 2019, I predicted that SpaceX would eventually kill the market for small rocket companies, launching small satellites for small customers at small prices, but undercutting its rivals on price and driving them out of business. But even I didn't anticipate just how deeply SpaceX might do its cutting.

You see, when SpaceX first announced its Transporter program, in which groups of small satellites from multiple companies would be bundled aboard single Falcon 9 rockets for roughly quarterly launches (four times per year), the company advertised that it would put small satellites in low Earth orbit for about $15,000 per kilogram. With multiple small rocket-maker rivals offering to launch for similar prices, however, SpaceX quickly cut that price -- by two-thirds -- to $5,000 per kg.

That's a hard price to beat. With 300 kg capacity and a price of $7.5 million, Rocket Lab's Electron -- currently America's second-most-flown rocket after SpaceX's Falcon 9 -- costs five times as much, per kilogram of cargo: $25,000. Rival ABL's RS1 rocket is supposed to cost just half that -- $12,000 per kg. And Relativity's Terran 1 wouldn't be much more expensive at $13,333 per kilogram. But both those prices are still more than twice what SpaceX can charge, and neither ABL's nor Relativity's rockets have actually gotten into orbit yet.

What's more, SpaceX could theoretically charge even less than $5,000.

According to SpaceX's own capabilities and services information sheet, the Falcon 9 reusable rocket that SpaceX uses for Transporter missions has a maximum payload of 22,000 kilograms, and sells for $67 million per launch. A bit of quick calculator work tells you that SpaceX should be able to charge as little as $3,045 per kilogram for Transporter missions without giving up any of the profit margin it ordinarily earns on Falcon 9 launches of larger satellites for other customers.

Business gets worse for SpaceX rivals

And now here's the latest bad news for SpaceX's small rocket-building rivals:

According to a recent report by space company researcher Payload Space, estimating the sources (and profitability) of SpaceX's various space launches in 2023, SpaceX may be charging much less than $67 million per Transporter launch (or $3,045 per Transporter-kilogram). In fact, Payload calculates that the four Transporter missions that SpaceX put in orbit in 2023 averaged just $45 million each. And if that's correct, then SpaceX may be charging as little as $2,045 per kilogram for its small-sat express missions.

Yes, you read that right. SpaceX may now be charging $2,000 for a service that other companies can't provide for less than $25,000.

How do you compete with that?

Commenting on SpaceX's cutthroat competition for small satellite launches (and large satellite launches, and medium satellite launches -- basically, for all the satellite launches worldwide) in early 2023, Rocket Lab CFO Adam Spice warned that even at $5,000 a kilogram, SpaceX's low prices had already effectively diverted "a lot of volume" that might otherwise have flown toward small rocket makers and given them a chance to grow bigger -- even as competition from SpaceX "suppressed" the prices that rival rocket makers could charge.

If Payload's estimates are right, though, the situation could have gotten even worse as 2023 progressed, with SpaceX potentially having cut its prices (per kilogram) by 60% or more.

That's the bad news.

The good news is that despite this competition, Rocket Lab (at least) still managed to set a new record for rocket launches last year (launching 10 times), even as it upped its cadence of launches. What's more, with two launches under its belt in the first two months of 2024, the company appears to be still accelerating its launch rate. Against all odds, therefore, it almost seems like there might still be enough business to go around, despite SpaceX's best efforts to hoover up all the launches for itself.

Admittedly, no other small rocket companies seem to be reporting similarly good news. Competition from SpaceX does appear to be taking its toll on the industry as a whole. But Rocket Lab's success does at least give some room for hope that rival rocket companies can find a way to compete with SpaceX despite the company's vast advantage in pricing.

It's a slim hope, true. But it's a hope.