Satellite launch failures alone can cost in the hundreds of millions of dollars

Satellite costs are driven partially by launch costs. If launches are expensive, then satellites need to be highly reliable. If launches are cheap, then satellites need not be so reliable, and therefore can be cheaper.

Insurance averages out the costs of launch failures.

Dropping the costs of satellites improves the market and introduces the possibility of mass-production, further dropping the costs and further increasing demand, which further drops the costs through economies of scale, etc.

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We know what can happen, economically, because we have experience with mass-launchings in the form of the V2.

http://www.google.com/search?q=v2+rocket+%2413000

A Rocket a Day Keeps the High Costs Away

Then, starting with the US$13000 marginal cost of a V2, we arrive at a cost of ...

One analogy in particular regarding V2 rockets, Nazis, and ignoring the use ... The recurring cost was $13000 a launch for those vehicles. ...