Will the U.S.’s New Drone Pilot Certification Accelerate Commercial Growth?

FAA testing and certification for small UAS remote pilot certificates begins in earnest this month, but does that mean the commercial drone industry will see rapid growth?

THE FACTS:

Beginning August 29, 2016, the new small UAS Rule for commercial drone operations in the U.S. takes effect.  One very important change is that operators will now have to obtain a remote pilot certificate with a small UAS rating. Under the new rule—also known as Part 107—the person actually flying the drone must have this certificate, or be directly supervised by someone who has one. In advance, the FAA has published a variety of documents to assist businesses seeking to be compliant with the new regulation. You can find an article with references to those documents here.

WHAT’S COOL AND WHAT’S NOT:

The new rule (and the new certification process) marks a complete shift in the way the FAA permits commercial drone operations in the National Airspace System (NAS). Under the old approach, known as Section 333 Exemption, companies or individuals could apply for an airworthiness certificate exemption and then the FAA would grant them on a case-by-case basis. Commercial operations rules also required the pilot-in-command of drone operations to have at least a sport pilot’s license.  At last count (8/19/2016), 5,542 petitions had been granted. The process was intended to provide safe and legal entry into the NAS, thus discouraging illegal operations and improving safety. It was anticipated that this activity would result in significant economic benefits.

The point here is Section 333s were granted to the business operators of the aircraft–not the pilots themselves. The new rule is pretty much the opposite.  It is a pilot-based certification that switches the responsibility from a business entity to a person.

THE RUB:

In March 2016, the FAA released its annual Aerospace Forecast Report Fiscal Years 2016 to 2036, which cites potential sales of more than 600,000 commercial small UAS requiring registration, growing to 2.7 million by 2020. This forecast was developed in conjunction with the Teal Group Corporation. They segment the commercial market into industrial inspection, real estate / aerial photography, agriculture, insurance, and government with industrial inspection taking the bulk of the market at 42%.

But as I have written in Diversity and Hype in Commercial Drone Market Forecasts, Teal’s forecast is inflated and out of touch–as are a lot of others. We currently track 41 different forecasts. The trouble is none take into account existing market trends or the economic force that a lower barrier to entry will have on pricing of drone-based business services. To put this disconnect into perspective, one only need look at other related forecasts.  For example, the revenue of photography services in United States in 2020 is expected to be about $6.7 billion. Portrait studios account for about 70% of industry revenue; commercial photography for about 30% of that. That means commercial photography is only a $2 billion market.  How we get from there to PwC’s prediction that $127.3 billion of current business services and labor will be replaced by drone-powered solutions is baffling to say the least.

BOTTOM LINE:

Our survey data going back to 2014 and even our most recent report tells us that the film/photo/video market is–and will probably always be–the largest commercial drone market segment. Neither Teal nor PwC forecasts account for the full potential of drones in that segment, nor do they incorporate any first-hand knowledge from those who’ve already operate in that segment.  In contrast, I have heard from scores of photographers and videographers who operate their small UAS for business without regard to legality. Most never applied for a Section 333 because of the stringent pilot license requirement. Most have been waiting for this day to arrive so they can get certified and “come out of the shadows” to operate legitimately. Most will never do industrial inspections, or agriculture, or any of the other business services being predicted for commercial drones.

This article says 3,351 people have already signed up with the FAA to have their aviation knowledge tested on the first day possible. I predict most of these are either film/photo/video operators who were granted Section 333s and never had a pilot available to them or those operating in the shadows. I’m just not convinced that means big money for the industry yet. We’ll see what happens, but one thing is for sure—we’ll see a lot of very small businesses (read: photographers and videographers) now openly advertise their aerial services.

Image credit: Shutterstock

This post first appeared on DRONELIFE.com

DJI’s Foray into the Enterprise Drone Market

Will its reliance on channel partnerships address the real needs of commercial operators?

THE FACTS:

Without the usual fanfare associated with a new product release, consumer drone manufacturer DJI opened up a website (http://enterprise.dji.com) in July 2016 that is dedicated to commercial / enterprise use of their drones. The website lists five industrial uses: agriculture, energy, public safety, media & creative, and building & infrastructure. The pages present use cases, news, and product solutions that showcase their technology, software development kit (SDK), and industry-specific partnerships.

Since that time, DJI has made several announcements that appear – at lease on the surface — to target the enterprise market for drones with end-to-end solutions. This includes announcements for:

WHAT’S COOL AND WHAT’S NOT:

It’s impressive that DJI understands that they need to upscale their offerings if they want to compete in the growing enterprise drone market. Past product announcements reinforce DJI’s desire to appeal to industrial use.  Product add-ons like the Zenmuse XT thermal imaging camera (developed in conjunction with industry leader FLIR) have led to a broadening of DJI’s channel with dedicated enterprise offerings like this one and this one. Product platforms like the Matrice 100, the Spreading Wings product line, and the Agras MG-1 agricultural spraying octocopter all point to an increasing focus on commercial use.

Enterprise drone data service providers have noticed the popularity of DJI drones and recognized the need for a DJI-based solution.  Several previously open source code users — including DroneDeploy, PrecisionHawk (DataMapper), and Skycatch — now have dedicated DJI mission planning and data apps that take advantage of the SDK.

As our research shows, DJI leads the general market in small drone sales with a 50% market share in North America across all price points. But in the markets for higher priced commercial drones, DJI does not hold that advantage – even in the media and creative market that is their specialty.  In those markets, where drone solutions cost more than $7,500, DJI’s market share drops to 33% and goes down to 18% for even higher priced solutions. So, their strategy to grow product sales via partnerships makes sense.

However, what’s exceptional has yet to be fully developed and what’s already released seems out of focus. For example, DJIs investment in Hasselblad has so far only yielded the A5D & DJI M600 bundle – a bundle that DJI does not list on their enterprise site and a bundle which DJI expects Hasselblad to position and market. As a follow-up I called several Hasselblad dealers to see who would buy it and I got some pretty shaky answers to say the least.  To this day, I’m still in doubt about who is the real buyer and what will be the volume of sales.

THE COMPETITION:

On the surface it seems like DJI is making the right moves. But look closer, and you will find it’s clear they don’t understand the markets they’re targeting, don’t understand how much their competition is entrenched already with the customer, and don’t understand solution selling. I liken it to Apple when it first started trying to sell to enterprises. When enterprises soon realized Apple mobile products didn’t meet their security requirements or their workflow and data storage needs, third-party vendors filled the gap.

In a recent series of white papers called “The Truth about Drones in…” I wrote about the vendor competition in the industries DJI wants to target. For example, in The Truth about Drones in Construction and Infrastructure Inspection, I discuss how investors are already taking positions. In June 2016, Kespry closed a $16 million Series B round, and software company Autodesk Inc. (via its Forge Fund) made an investment in drone manufacturer 3D Robotics. The report also discusses how brands like Leica Geosystems, Lockheed-Martin, Riegl, Trimble, and Topcon are much better known among aggregates and construction companies. I could go on about how hard it will be for DJI (or anybody else) to differentiate its current technology from other vendors that provide drones for the same markets and industries they want to serve, but you get the point.

BOTTOM LINE:

It’s pretty safe to say that DJI’s current strategy of repackaging and repositioning existing products to “fit” the enterprise market is not a winner. Mind you, DJI does make and sell some great products, but as we have seen so far, they are wholly dependent on others to provide customer solutions. It’s up to their channel partners to figure out the customer problem being addressed and how to bundle a solution. The poster child for this in the surveying and mapping market is Phoenix Aerial Solutions, which packages up LiDAR drone solutions.

One thing is for sure. With so much dedication to R&D we will see more products from DJI to support the enterprise market this year and next — and we will see their channel partnerships flourish.  However, don’t expect to see a fully supported turnkey survey-grade LiDAR drone solution from them anytime soon.

This post first appeared in DRONELIFE