Commercial Drone Markets: 2016 Year in Review

Last year at this time, I reflected back on the news and trends of the commercial drone markets of 2015 and wrote about the mixed state of affairs in the U.S.  Back then we saw only 2,500 Section 333 grants for commercial activity, and the press’s narrative that ‘drones are cool’ turned to ‘drones are a privacy invasion headache.’ This was tempered by a proliferation of the drone conferences that had both exhibitors and vendors scrambling to attend. We also saw the outcome of the UAS Registration Task Force Aviation Rulemaking Committee and the FAA’s rapid implementation to put hobby drone registration in place.

In January 2016, I wrote a piece titled Six Trends Driving the Commercial Drone Market in 2016 and Beyond, which articulated that, while making predictions is not an exacting science, six trends would provide key opportunities and challenge for the industry:

  1. Competition
  2. Fidelity
  3. Sensors
  4. Mobility
  5. China Incorporated
  6. Virtual and Augmented Reality

In this post, I’ll review those trends as well as other significant news for drone manufacturers, service providers, and investors in 2016.

What rang true?

  1. Competition

The biggest news all year was that the FAA Part 107 regulations are now in place. And they’re not as onerous as they could have been. Hurray! We (at least in the U.S.) have the basis for an industry and a firm regulatory framework upon which to grow.  And that’s what I saw and heard from so many companies that want to use drones for their businesses at the major drone shows.  So many were sitting on the sidelines waiting for regulations to be clear.

Several weeks ago, Patrick Egan of sUAS News wrote a piece called “Part 107 Your Golden Ticket” that sums my feelings and it’s this: There has been some grousing about what’s not in the rule. But there is plenty of work that can be done under this rule. The 10 years of uncertainty is over, and people can begin to offer services—from the real estate agent who wants aerial photos to the cellular company that wants tower inspection, to the insurance company that wants proper damage assessments, to the first responder who wants a better view of an incident. I think that’s exciting.

And so is having competition.  Many think it’s a race to the bottom on prices for drone-based business services–and that’s true in part–but the other side of the coin is there is healthy competition, which delivers customer benefits. Because everyone is working harder to produce a better product.

  1. Fidelity

The desire for better fidelity – that is, better image and video resolution – is still one of the major drivers in the commercial drone industry.  This is not just true for professional drones but also consumer drones. Last year the major brands like Autel, DJI, and Yuneec continued to offer integrated 4K video recording cameras on consumer and prosumer drones, but they did so at lower prices than in 2015.  Additionally, this past year, DJI upped the fidelity bar with its Phantom 4 Pro and Inspire 2. The Phantom 4 offers more powerful video processing for 4K videos at 60 frames per second (fps) at a 100 Mbps bitrate. The Inspire 2 tops that and offers 5.2K at 30 fps on the X4S camera. These also offer a mechanical shutter, eliminating the rolling shutter distortion that can occur when taking images of fast-moving subjects or when flying at high speed. In effect, they are as powerful as many traditional ground cameras.

  1. Sensors

The trend for better and smaller, more lightweight sensors for drones—such as stereoscopic, ultrasonic, LiDAR, infrared, and spectral sensors – was hot. I wrote about some of that in Sense and Avoid for Drones is No Easy Feat. I could fill a small book with all the announcements, investments, and product releases from companies like DJI, Intel, Parrot, SenseFly, Slantrage, and Velodyne this past year. All of these will help drones perform tasks like collision avoidance, 3D imaging infrared thermography, or improved crop vigor analysis.

But the rising star in the sensor market is Aerotenna.  In July, we saw this startup take home first prize at the NASA UTM Drone Sense and Avoid Tech Competition. It turns out Aerotenna has some incredible new technology–microwave sensors (that’s basically miniature radar) that are coupled with active sensing autopilot capability that scans the surroundings during flight and avoids potential collisions autonomously. So by combining microwave-based sensing with aerospace and control engineering, they are solving many challenges of being able to fly autonomously beyond visual line-of-sight. This will uncover new applications for UAV platforms.

  1. Mobility

A third major driver this past year was mobility. In the consumer world, the scales have tipped from PCs and TV to mobile devices.  What this means for drone manufacturers and service providers is that their application development has shifted from desktop to mobile apps.

In 2016, we saw DroneDeploy double down on this trend with the introduction of an App Market, a store for drone applications from a range of companies—including Autodesk, Box, John Deere, and 13 others—as well as a variety of industry verticals. I wrote about that here.  The App Market includes mobile device applications from Airmap, Dronelogbook, Flyte, Kittyhawk, NV Drone, Skyward, and Verifly that help pilots and businesses manage drone operations and compliance.  In a nutshell, these apps enable enterprises and drone-based business service providers to automate their workflow and data integration with specialized tools built right within the DroneDeploy user interface.

  1. China Incorporated

Throughout 2016, Chinese companies both large and small entered the world market with consumer drones to establish market share or increase it. Do I really need to explain this? Tractica (not known for accurate commercial drone forecasts) says consumer drone sales will continue to surge over the next several years, with global annual unit shipments increasing more than tenfold from 6.4 million in 2015 to 67.9 million by 2021.  While average selling prices (ASPs) for drones will continue to decline sharply during that period, they anticipate that total revenue will increase from $1.9 billion in 2015 to $5.0 billion in 2021. I won’t argue with those numbers.

What didn’t ring true?

  1. Virtual and Augmented Reality

Virtual and augmented reality for drones was a bust this year. Seriously. I expected to see a significant announcement from someone about the use of augmented reality using the data from commercial drones, but all I got was this lousy t-shirt.

What else happened?

Investment, mergers, and partnerships. That’s what happened. The major players were Airware, DJI, Intel, and Parrot. In September, Airware acquired Redbird with the intent of building a full-stack drone services empire. All throughout 2016, DJI announced partnerships with at least 14 companies including Epson, Ford, Leica, Luftansa, Measure, and PrecisionHawk.

The surprise too many of us was just how aggressive Intel got in the drone space this past year. They acquired drone manufacturer Ascending Technologies, made a further investment in data services provider PrecisionHawk, and bought Movidius and Mavinci.

Parrot took a different approach. They continued with their past strategy which was to make investments.  Previous investments included Pix4D, Airnov, and MicaSense.  This year Parrot made three minority investments in BioCarbon Engineering Ltd., a UK company that is developing a drone-based reforestation solution, Planck Aerosystems Inc., a US company that is developing drone-based surveillance solutions for the Navy, and Nano Racing S.A.S., a French company that is developing a small-scale immersion-piloted racing drone.

What about next year?

There were some hard lessons learned this past year and they point to trends I believe we’ll see next year.  For example, take Jonathan Downey’s 8 Lessons Learned Turning Aerial Data into Enterprise Outcomes. If you read between the lines, you’ll see a brutally honest confession of their hard times. Wisdom comes from experience and kudo’s to Jonathan for giving the commercial drone industry some good advice–especially #3: To drive business outcomes, provide an end-to-end solution.

But there is a scary insight from last year and it’s buried in this post by Measure: How is the drone industry moving forward? It says:

“..on October 26, the FAA and the Transportation Research Board convened a workshop to aggregate stakeholder perspectives on the expected growth of the drone market in the coming years. Key issues addressed included the drivers of and obstacles to growth in the drone industry, and how best to predict market trends. The insights provided by the representatives from the commercial drone industry, defense-oriented UAV industry, government, and aviation advocacy groups will aid the FAA as it creates its next UAV market forecast.”

So, what did the stakeholders say to FAA? At the Commercial UAV Expo I heard one say they told the FAA that their forecast was too low.  Most said we’re going to see tens of millions–maybe hundreds of millions–of drones flying in national airspace in the near future.” What else would they say?  That’s what they told their investors. Insane.

Image credit: Shutterstock

This post first appeared in sUAS News ‘The Market’

Is Sky-Futures Expanse Drone Inspection Software Good for All?

Sky-Futures cloud-based drone inspection visualization and reporting software squarely targets the asset inspection sector, but will it be broadly adopted?

 

THE FACTS:

No one questions whether the founders of Sky-Futures know what they are doing.  When it comes to drone inspections they have “been there, done that.”  You can read about their history and where they are going in The importance of industrial experience when enabling enterprise with drone capabilities, a post written by co-founder & CEO James Harrison. I won’t repeat all the facts, just the salient one.

When they started in June 2009, they assessed different markets, sizing them and then trying to forecast how they would look in 5 and 10 years’ time. They chose the drone inspection service market in the oil and gas (O&G) industry because of its highly inaccessible, highly hazardous and critical infrastructure, and its focus on safety and regulation. They succeeded in understanding the very specific needs of the industrial inspections market, got steady revenue stream, and have now turned to offering a software-as-a-service (SaaS) product as another generator of their future value. Their product is called ExpanseSM and is designed and built for drone-based operations management, inspections, data analysis, and reporting.

WHAT’S COOL AND WHAT’S NOT

There’s a lot to like about Expanse.  For one, it has an asset-centric view of the world—not an inspection-centric one.  In the inspection-centric view, reports provide little context for consumers of the information on the “who, what, where, and when” of problems. By taking the asset-centric view, Expanse starts with the “where” (a specific structure) and allows users to navigate to the areas of an asset that’s important to them—the “what,” like a rusty pipe or misaligned cell tower antenna. Everyone reading inspection reports has a different need (not everybody has responsibility for the integrity of pipes), so the software provides context.

The other thing that is very smart about Expanse is that all elements of the software are built around the deliverable—the inspection report. In this regard, it starts with the end in mind. How Covey-ish is that? The software enables drone inspection firms to share analysis reports with multiple stakeholders. Customers and third parties can access the media with security controls. It uses leading edge security protocols (like web-based video streaming), where unique permission holder access information is generated for each media file at runtime and cannot be shared with others. This should please enterprise privacy and risk mitigation legal beagles and IT data governance stewards.

There’s a whole host of features that users will like, such as the ability to make 3D links to objects that can be marked up with annotations, measurement, and observational classifications. Additionally, Expanse comes with image analysis tools for scaling, measurement on the incident plane, focus problem area size, comparisons over time, etc.

THE COMPETITION:

Expanse is new to the market, and it’s clear it was built around the needs of Sky-Futures’ O&G clients as consumers of the data. Sky-Futures’ hope is that its software’s features will translate to the requirements of the entire vertical infrastructure inspection market. They hope the integrity, inspection, and business drivers for a bridge, wind turbine, cell tower, and other managed facilities and structures share the same key characteristics that are addressed by their O&G-focused Expanse software.

We have written about the needs of the inspection market in The Truth about Drones in Construction and Infrastructure Inspection, and we think Expanse has a head start on the path to greater adoption. But we also think there will be a struggle for enterprises using drone data in general. That struggle is learning how to integrate the inspection data and analytics from software like Expanse into broader, more highly adopted software used for enterprise asset management (EAM), such as Infor EAM, Oracle EAM, and SAP EAM.

Infor may have leap-frogged all of this with their Drone Enterprise Asset Management Solution (DEAMS), which is also offered Drone Aviation Corp. Infor’s DEAMS uses purpose-built middleware that processes the data collected by drones’ onboard sensors and integrates it with Infor EAM and its maintenance, repair, and overhaul (MRO) applications. The data from DEAMS can also be analyzed with easy-to-use analytics to produce up-to-date information about the asset life, allowing for quicker and more effective decision-making.

BOTTOM LINE:

So, stepping back, one question remains: In the long run, will large enterprises employ service providers who use software like Expanse, or will they opt for integrated solutions like DEAMS? There may be a middle ground when Sky-Futures (or a third party) offers integration plugins for broader EAM solutions. We’ll see.  In the meantime, we expect that Expanse will continue to evolve and offer new features that other customers outside of O&G want.

Image credit: Sky-Futures

This post first appeared on DRONELIFE.com

Can AeroVironment Compete in the Commercial Drone Market?

AeroVironment’s new drone and cloud-based analytics platform squarely targets the commercial sector, but are they targeting the wrong vertical, too late in the game?

THE FACTS:

Earlier this month, the military and tactical unmanned aircraft systems manufacturer AeroVironment (NASDAQ:AVAV) proudly unveiled its new QuantixTM drone and a cloud-based analytics platform called the AeroVironment Decision Support System (AV DSS™).  The combo is designed with the civil/commercial markets in mind. The drone is a hybrid design that enables the aircraft to launch vertically like a quadcopter and then transition itself for horizontal flight, taking advantage of a fixed-wing drone’s aerodynamic efficiency and range.  According to the company, the drone can map 400 acres in about 45 minutes, and its overall flight time is supposed to be an hour per battery.

The Quantix is a key piece to a larger end-to-end solution AeroVironment hopes will meet the needs of the agriculture, energy, and transportation industries, among others. Key to AeroVironment’s solution is a proprietary mobile interface that works with their secure cloud-based data storage.

WHAT’S COOL AND WHAT’S NOT

It’s great to finally see AeroVironment come out with an offering dedicated the commercial drones market.  While their Puma AE was used for aerial surveys in Alaska—and was the first time the FAA has authorized a commercial UAS operation over land, this product will be the first non-military product in their lineup. So, welcome. Or should I say—I’ll welcome you when you get here. Quantix won’t be available until Spring of 2017. And the price has yet to be announced.  However, in my conversations with the company at last month’s Drone World Expo, it’s clear some among their ranks understand it will need to be priced below $20K, or it’s simply not going to sell well.

It’s interesting that AeroVironment chose to target agricultural needs with its first commercial drone. At first glance, the drone looks well equipped for that, with RBG and multispectral cameras.  But, boy howdy, are they in for some heartburn when they discover they’ve targeted the most difficult sector to penetrate. We have written again and again about the challenges drone service providers have in providing clear ROI in agriculture (and how bad the forecasts are), but I guess that won’t stop manufactures like AeroVironment from thinking they will somehow buck the trend.

The other problem I see is that their new drone is a tail sitter. Tail-sitter drones are notoriously difficult to land in any wind.  I am not alone in this assessment; see another review here. We’ll see if their system is clever enough to compensate for wind gusts, but one thing is clear: there is nothing on the drone to assure a precision landing – no vision positioning system or sense-and-avoid technology in the tail other than a two antenna GPS system. That is so “2013,” and it puts their drone in the same category as a GoPro Karma, which drifts and lands “loud and drunk.

THE COMPETITION:

Most of the companies that serve the precision agriculture market are small businesses. It was clear back in 2014 these companies were working hard to learn firsthand what farmers want from small drones. In doing so, they established networks of distributors and service providers that for the most part have locked other players out of the market.

Manufacturers of small drones for precision agriculture have long since consolidated around DJI and SenseFly because of their (or a third party’s) flight control, mission planning, data services software, and mainly their functional maturity and low cost.

The large aerospace companies and Department of Defense (DoD) contract vendors like AeroVironment do not have a presence in this sector. Even though some have participated in agricultural academic studies, those companies’ products as a whole are unknown in the farming community. They simply have not established the necessary relationships with growers, dealers, coops, agronomists, and local service providers.  As a result, it’s probably too late for them to capture any significant U.S. agriculture market share.

BOTTOM LINE:

In my opinion, AeroVironment’s entry into the commercial markets is risky. For one, they are arriving late to the party. Second, the agriculture sector in particular—at least in the U.S.—is already set. I think Aerovironment is going to struggle to move customers from established vendors.

I worry that all this will take some time for them to realize. In the meantime, there is pressure for them to perform. For years, investors have hoped that the company would benefit from the rising interest in unmanned aerial vehicles. Indeed, the recent positive performance of their stock appears to have come in part from the rise in interest in drones due to a more favorable regulatory environment in the U.S.  But it remains to be seen whether this new offering will make a difference.  We’ll see.  In the meantime, join me in welcoming them to the party.

Image credit: Skylogic Research

This post first appeared on DRONELIFE.com