The military satellite business is a strange beast. The Pentagon long ago made it policy to rely on civilian contractors to supply their eyes in the sky. But there's not enough of a commercial market to make the satellite business worthwhile. So, instead, the U.S. military throws extra cash at the companies, to make sure they'll keep making the orbiters.
Yesterday, for example, the Air Force announced it would start paying Boeing and Lockheed Martin "50% more to send U.S. military satellites into space to compensate for the collapse of commercial demand that threatens their launch businesses," according to Bloomberg News.
"Payments will increase to as much as $135 million per launch from $91 million, based on a preliminary estimate, because the service wants to ensure the companies stay in the military program, said Richard McKinney, the Air Force's deputy director of space acquisition."
Last year, the Pentagon handed out a $500 million contract to commerical satelitte imagery provider Digital Globe. Shortly thereafter, it promised to make a similiar payment to Digital Globe's competitor, Space Imaging, so the company could stay afloat.
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