Drones Are Doing More In U.S. Than You May Know, As These 3 Companies Show

Five years ago, the pundits predicted that by now we would be seeing tens of thousands of drones buzzing over our heads delivering everything from pizzas and burritos to the latest “must-have” item from Amazon. So what happened? Where are they? In a nutshell, they are here, but the general public doesn’t see them—at least not daily—and they aren’t necessarily delivering what was predicted.

The fact is that commercial drones fly in remote areas or over private property every day by the thousands. They’re performing work on farms, powerlines, construction sites, cell towers, and oil pads, especially in the U.S. where there are more than 118,000 FAA-certified remote pilots. Compare that to the U.K., where there are just under 5,000.

Delivering pizzas and burritos will likely be a very small part of what drones will be doing in the future. According to the largest benchmark study on commercial drones, the bulk of all current industrial use outside of film, photo and video falls into two categories: surveying and mapping land areas and inspecting and monitoring physical structures. And it’s these two uses that will continue to drive the growth of drones for industrial use for many years to come.

Three companies represent this growth and are worth getting to know: PrecisionHawk, DroneDeploy and SkySkopes. In many way,s they are emblematic of the current state of the growing commercial drone industry and provide insight into its future.

PrecisionHawk

Founded in 2010 and headquartered in Raleigh, N.C., PrecisionHawk was one of the first vendors to offer a full end-to-end enterprise drone solution stack. That stack included a drone aircraft with advanced sensors, software, analytics, and contracted services for inspecting things like oil well pads and utility lines and more. (“Advanced sensors” refers to specialized cameras on the drone that detect things like crop growth patterns.) With over $107 million in investment and more than 180 employees, PrecisionHawk has some large customers, including ExxonMobil, John Deere, Monsanto, and Verizon. They offer services in more than 150 countries and have a network of 15,000 pilots.

Two things illustrate how PrecisionHawk leads the industry. First is their regulatory experience and FAA partnership. Second is their focus on operating drones beyond the pilot’s ability to see them, or “beyond visual line of sight” (BVLOS). PrecisionHawk was one of a few companies to partner with the FAA on its Pathfinder Program, and the company’s work is informing current FAA regulations and BVLOS policy. PrecisionHawk also understands that as the commercial drone industry evolves, widespread BVLOS drone inspection has the potential to significantly change business models for many industries. With their programs and papers like “The Economics of Using Drones for BVLOS Inspections,” they educate businesses and help them evaluate when it’s best to use traditional ground and manned aviation, line-of-sight drones, or BVLOS drone inspection approaches. PrecisionHawk is unique in evaluating the costs and benefits of BVLOS operations compared with traditional operations, which allows businesses to plan an aerial intelligence strategy that delivers the most value for the money.

DroneDeploy

San Francisco-based DroneDeploy provides software that controls drone flight plans and workflows as well as processes the images they collect. They have more than 4,000 global customers mapping and assessing everything from construction progress, to disaster recovery, to agricultural crop vigor.  Founded in 2013, the company partnered with leading drone manufacturers to provide its software to operators in a variety of industries, including agriculture, real estate, mining, construction and many other commercial and consumer arenas. Having raised $56M in funding, DroneDeploy started by selling software directly to pilots and later added selling through the channel that supplies mid-size companies and then added direct sales to enterprises and resellers.

By every measure, DroneDeploy has the most popular non-OEM mapping flight application on the market. They boast that their software processes over 100 million images per year and measures more than 10 million distances a year (for instance, between objects). But they are not resting on their laurels. Drone use by surveyors and mappers is rapidly becoming more sophisticated, and as that’s happened, DroneDeploy has been pushing boundaries more than any vendor. Their app market is the largest set of industry-specific integrated applications available.

Part of what has made DroneDeploy (and the drone industry itself) so successful has been the consumerization of drone technology. What others missed but DroneDeploy didn’t was the foresight to see that the prosumer drone category would be the only place where sales volumes and margins would be strong enough for aircraft manufacturers to recoup R&D investment. That’s why, early on, they pivoted from open source-based aircraft to DJI drones since DJI is and has been for four years the dominant player in the space. Last year, DJI’s market share for drone aircraft was 74%. As a result, all the major mission planning and mapping applications like DroneDeploy and dozens more now integrate with or run on DJI’s products. Most of them started off with applications dedicated to their own drone, but soon found that most professionals want to use the simpler and more reliable DJI prosumer drones. DroneDeploy made that bet early, and it has paid off.

SkySkopes

Whereas PrecisionHawk offers a full drone stack and DroneDeploy offers software, this last company doesn’t manufacture anything. They provide drone services. And in a field of more than 30,000 service companies, very few stand out as full-time ventures—let alone as profitable and growing—but SkySkopes does. They succeeded because they specialized. Based in Grand Forks, N.D., SkySkopes started in 2014 and has grown from a small startup with four part-time employees to over 18 full-time employees and four offices across the upper Midwest. Over the years, SkySkopes has refined its focus to strictly providing aerial services for the energy industry and now has operations in California, Texas, Minnesota, Florida, and Europe.

What makes SkySkopes successful is they are not afraid to push the limits of drone technology. Their specialization in acquiring aerial data with advanced aircraft has landed them projects with CenterPoint Energy, Duke Energy, Xcel Energy and a host of others. SkySkopes and NASA have also teamed up over the past few years to demonstrate and test BVLOS use cases for the UTM project to integrate civilian low-altitude airspace and unmanned aircraft system operation. All this landed CEO Matt Dunlevy a seat on the advisory board of the Energy Drone & Robotics Coalition, the only event exclusively focused on the business and technology of aerial, ground/surface and subsea robotics in energy operations.

Together these three companies encapsulate the present state of the growing industrial use of drones. Clearly, that’s not what the media prefers to focus on since it’s not sexy drone pizza delivery. But it’s important work with great business benefits to specific industries.

This article first appeared on FORBES.com

Image credit: Photographer: Patrick T. Fallon/Bloomberg, © 2019 BLOOMBERG FINANCE LP

Three Forces That Shaped the Drone Industry in 2018

This was a big year for the commercial drone industry as a whole. It saw a significant increase in the business adoption, the expansion of the FAA’s LAANC program (the Low Altitude Authorization and Notification Capability that provides access to controlled airspace near airports), the launch of the UAS Integration Pilot Program from the FAA (aka IPP), new products like the Phantom 4 RTK from DJI, and some significant developments for new regulatory frameworks for drones in Europe and in India.

In this post, I’ll illustrate some of the market trends over the past year using data from our third annual drone industry benchmark report and describe what I think shaped the drone industry.

Listen to this companion Drone Radio Show podcast here for the complete assessment.

If I was to distill the key forces of 2018 on the drone market into three things, I would say they are:

  1. Business adoption
  2. Vendor contraction and expansion
  3. The DJI effect

Force 1 – Business adoption

Adoption of aerial drones and drone technology was not widespread, but it did grow in select industries such as insurance, utilities, construction, and survey engineering,

In 2018, we saw companies begin to move beyond the provisional use of drones—where they were outsourcing to determine a drone program’s feasibility–to standing up or expanding internal teams to manage workflows and data.

You can see this trend, particularly in the U.S. when you realize the growth in the number of certified Part 107 remote pilots. The U.S. began the year with about 74K certified remote pilots, and as of the end of November, we had about 112.5K. So we’ve added about 38,500 pilots this year. That’s a 50% increase over last year.

The thing about this increase is that it’s mostly pilots who work for companies, enterprises, or public agencies with internal drone programs.  We saw this trend in the data from our annual benchmark survey conducted over the summer.

Force 2 – Vendor contraction and expansion

There were some winners and losers this year in the race to gain more customers and satisfy investors.

Probably the biggest contraction story was the $118M collapse of Airware. Fortunately, Delair acquired Airware’s software solution, which ensures the continuity of service for existing customers and dealers. The agreement also included keeping the team from construction and mining specialist Redbird, which Airware initially bought in 2016.

The other contraction was from Parrot. Earlier in the year, Parrot released its ANAFI work drone for the commercial drone market. But then just last month, Parrot’s CEO announced disappointing financial results because of what he called “a significant consumer drone market contraction.” Suffice it to say they are running on thin cash flow, and it will be interesting to see if there will be a right-sizing of Parrot and its affiliates like senseFly and Pix4D in 2019.

Another big move this year was PrecisionHawk’s acquisitions of both HAZON and InspecTools. These businesses specialize in inspection services and technology for the energy sector. They bring PrecisionHawk the domain expertise that will enable tighter integration between collecting and analyzing drone data—something customers want. We think these acquisitions position PrecisionHawk as a leading service provider for companies wanting to perform asset inspections—specifically those companies in the oil & gas, insurance, and utility industries that need beyond visual line of sight (BVLOS) operations. If you recall, PrecisionHawk was part of the FAA’s Pathfinder Program, so they have extensive experience in BVLOS ops.

Force 3—The DJI effect

You can’t talk about the drone industry without mentioning market leader DJI. The company continues to dominate the market and has made gains this year in every category, from drone aircraft at all price ranges, to add-on payloads, to software. Our survey data shows DJI is still the dominant brand for drone aircraft purchases, with a 74% global market share in sales across all price points.

DJI’s current global market share is two percentage points higher than it was last year (72%), and is a significant change from 2016, which showed them with 50% market share.

On that note, many industry and UAS news pundits speculated that security concerns about DJI small drone aircraft would be the death knell for DJI (a China-based company), but clearly these fears did not affect their sales. To stem concerns about DJI’s data security practices, the company hired a forensic investigation company, Kivu Consulting, Inc., to independently review DJI’s UAV data transmission and storage practices. Kivu’s analysis of the drones and the flight control system (drone, hardware controller, GO 4 mobile app) concluded that users have control over the types of data DJI drones collect, store, and transmit.

As I’ve have noted in our report, much of DJI’s dominance can be attributed to its aggressive product development, technological advancements, and partner development in the enterprise channel. DJI’s leadership role existed as early as 2015, when we looked at FAA data on commercial drone registrations. The company continues to release new product after new product, and it leads other manufacturers with technology and enterprise ecosystem partnerships.

We predicted last year that this would continue well into the future, given their current lead, their strategic partnership investment with Hasselblad, their recent investment in an R&D facility in Palo Alto, California, and the continuation of their AirWorks Conference enterprise partner ecosystem event.

That’s it for now. Look for a follow-up piece on our specific predictions for 2019, which will include investments, technology improvements, ecosystem partnerships, and software innovations.

Listen to the companion podcast here: http://bit.ly/2EynyIY

If you have questions about what’s in the report I mention or would like to comment, write me at colin@droneanalyst.com.

 

Image credit: Shutterstock

Four Commercial Drone Trends to Watch in 2018

In my last post, Five Biggest Commercial Drone Trends of 2017 and the Challenges Ahead, I used data from our 2017 Drone Market Sector Report to illustrate the major trends of the past year and describe the major challenges ahead for the drone industry. That post looked back, but this one looks forward, offering our specific predictions for 2018, including investments, technology improvements, ecosystem partnerships, and software innovations.

(Listen to this companion Drone Radio Show podcast here for our complete assessment.)

1. Investment and testing will continue in earnest on Unmanned Traffic Management (UTM) and beyond visual line of sight (BVLOS) operations.

With regulations moving at the speed of government and dissenting views on Drone ID, it seems like UTM (air traffic management for low-altitude drones) is an elusive dream. However, there is hope that testing being done on beyond visual line of sight (BVLOS) operations in drone corridors will provide the necessary inputs to integrate drones into the national airspace. Expect news this summer from the vendors and service providers conducting tests at NUAIR in New York as they release results and performance-based navigation standards begin to coalesce.

2. You’ll see more news on improved sensors, hardware integration, networking, and processing.

Already, we’ve seen announcements like this one for new thermal imaging drone payloads. Expect to see further Ethernet / IP sensor integration efforts as more and more remote managers demand immediate access to data from local operations. Expect more news on LiDAR / drone integration like this one from Delair-Tech as more land surveyors and construction professionals demand further time and money savings over traditional methods.

3. Look for more partnerships, software, and innovations coming from the DJI Enterprise ecosystem.

We noted in our 2017 Drone Market Sector Report just how much DJI dominates the industry with its 72% market share. All the major mission-planning and mapping applications—like DroneDeploy, PrecisionHawk’s PrecisionMapper, Skycatch, and dozens more—now run on the DJI SDK. What our report didn’t mention was DJI’s focused efforts to further expand its commercial ecosystem. DJI Enterprise’s AirWorks Conference is but one example, an event whose purpose is showcasing applied drone solutions for the commercial industry’s most challenging obstacles. Expect many innovations from DJI’s partners in the hardware, software, and service sectors.

4. Software will dominate advancements.

Along with the new imaging sensor announcements in 2018, we expect to see imaging software advancements as companies seek to combine RGB, thermal imaging, orthomosaic, and radiometric data.

We also expect to see more aerial imaging and mapping software firms announce artificial intelligence (AI) capabilities. Right now, most of this is cloud-based machine learning (aka deep learning and predictive analytics) where data sets are trained by specialized teams. You may see some edge-based AI announcements for image recognition/machine vision, but be cautious when you do. We think it’s still early in the technology development cycle and AI is at peak hype.

We think the big news for 2018 will be the integration of drone data and workflow into predictive maintenance and service solutions, as well as asset management systems. Capabilities include documentation, tracking, and GIS data integration. It may bring a yawn to some but we believe when you can connect the dots and show the effect of drone data capture on the balance sheet, CFOs and CEOs will take notice and drive further enterprise adoption.

Parting thoughts

As I speak to clients, I always like to remind them of two things about the commercial drone market. First, it’s not a drone market, it’s a data and information market. The drone is just a data capture device. Second, drones are aircraf, not consumer products and as such their operations are regulated by aviation authorities.  All technology advancements aside, this is a regulated market, so always expect lumpy, bumpy growth.

We hope you keep those in mind as well and wish you best success in the coming year.

Listen to the companion podcast here http://bit.ly/2CXe6uK.

If you have questions about what’s in the report I mention or would like to comment, write me at colin@droneanalyst.com.

 

Image credit: Shutterstock and Skylogic Research

Why the Drone Network of Tomorrow is Farther Away than You Think

Airspace integration and management solutions for drones continue to garner new investment, but most options are based on fairytale scenarios and raise more questions than answers.

I’ve been doing research on the commercial drone industry since early 2012, and it never ceases to amaze me how much hype there is.  A week doesn’t go by where I find a new fantasy forecast or see an announcement on how this or that drone networking solution is “game changing.”

How real are those claims that drones will one day be filling our skies and delivering packages? Where and when will we see massive industry growth and is that growth dependent on the existence of a drone network?  In this post, I’ll go over a few misconceptions, discuss the harsh reality, and offer two lessons learned that I hope will help make the conversation a bit more rational.

The hype

Question: How much spin is out there on drone networks?  Answer: A lot.

Take this piece, for example: In The Drone Network of Tomorrow (It’s Closer Than You Think). The author wants you to believe that the drone network of tomorrow is a few hurdles away.  In this futuristic world, users will remotely dispatch multiple drones right from their offices. They’ll specify the flight path, and the drones will fly there autonomously and collect data. In this world, there will be drones-for-hire stationed at key locations and you will just click on button to summon them at your command. It will be “the Internet of drones” and it will be accomplished via the LTE network, the same network to which every smartphone is connected today.

Investors buy it.

Read The Big Money Continues to Bet on Drones, which discusses Verizon’s recent acquisition of Skyward. Read Airmap’s own take on their announcement of $26 million in Series B funding from Microsoft, Airbus, Qualcomm, Yuneec, and Sony, with Microsoft leading the round.

The press buys it.

Read this recent article in Recode. It says:

Drones are, after all, flying computers that connect to the internet—connectivity on a drone is often used to share flight information with other drones, report to air traffic control or send aerial imaging back in real time to the operator.

I bought it, too.

In December 2014, I wrote Why Drones Are the Future of the Internet of Things.

But since that time I’ve done a lot a research to find evidence supporting industry claims, and the truth is, at every turn I’ve come up empty handed and found many misconceptions.

The misconceptions

Many in the industry have worked together to move forward the various Unmanned Traffic Management (UTM) projects. UTM refers to efforts to build an air traffic management infrastructure for drones, such as the NASA-FAA UTM project and GUTMA. Those initiatives are a collaboration between government regulators and private industry partners. At the center of those initiatives is the enablement of routine beyond visual line of sight (BVLOS–sometimes just BLOS) operations for commercial drones. Good. We need that. To see some of that work, download the latest presentations from the 2016 UTM Conference here.

While the NASA-FAA UTM initiative may have started out with some simple solutions, it’s now blossomed into an expensive “one-size-fits-all” behemoth that is proposing ways to control flight scenarios that don’t need them—those flights where no data exists showing any risk those operations pose to the NAS or nonparticipants on the ground. That hasn’t stopped UTM participants, along with the Drone Advisory Committee (DAC), though, from suggesting those controls.

I think it’s a good idea that’s gone bad. I am not alone in perceiving that many UTM and DAC participants think their charter is to integrate the Internet and the cellular network into the National Airspace System (NAS). The leader of GUTMA thinks his organization can do for drones what ICANN does for the Internet. Face palm.

Now, the snowball effect is these companies (and investors) believe drones are Internet-of-Things (IoT) devices that are going to magically multiply like rabbits once we have a drone network. Truth is, drones aren’t IoT devices; they’re data-gathering aircraft.  Yes, they collect data that looks a lot like the data from an IoT device in motion (see my presentation on that here), but equating them with IoT devices assumes way too much—like the need for constant connectivity to the Internet, for one. Here’s a clue: Drones from DJI, the dominant market share leader, don’t have it, nor do 99.9% of drones that operate in the NAS today.

The harsh reality

So, to put it bluntly, the vision of tens of millions of drones flying in the NAS alongside manned aircraft is overstated. Visionaries like to point to the 100,000 or so flights that happen today as the bellwether indicator of what’s to come. They point to the headlines that say package delivery drones will fill the skies as reality. But drone delivery has been seriously debunked, and the bellwether argument is a non-sequitur. The vast majority of the flights happening today happen in uncontrolled Class G airspace, happen around 200-300 feet above ground level, happen without any automated traffic control interaction, and happen without incident.

Also, our research says the growth of drone use by industries will be much more measured than the hyped growth figures that visionaries tout, and the bulk of operations will happen mostly as they do today within visual line of sight (LOS).  We don’t see huge volumes for BVLOS operations happening for many, many years—if at all. There are other factors hindering drone adoption beside regulations and air traffic control.  There are other reasons why companies will stick with incumbent technology like satellites and manned aircraft.  We have written much about hype in the drone industry, and if that’s new to you, then you can start your research with this SlideShare.

Two lessons to take to heart

Regulators and experienced military users know flying drones safely and securely in BVLOS operations is not easy. Because of its complexity, we now have a new term in aviation: Performance Based Navigation (PBN). PBN describes requirements for separating aircraft and avoiding collision. PBN is a combination of systems both on and off of the aircraft that affect its ability to navigate. And that takes us to our first lesson.

Lesson 1: Buried in the recent announcement of regular BVLOS flights of Aeryon SkyRangers at the Foremost UAS Range in Alberta was the fact that Ventus Geospatial had to meet very stringent criteria from Transport Canada (Canada’s civil aviation authority). The requirements prescribe a host PBN including:

  • Sense-and-avoid system to provide traffic separation and a means for collision avoidance. That system will have to detect the traffic in time to process the sensor information, determine if a conflict exists, and execute a maneuver according to the right-of-way rules.  That system must possess the capability to detect both cooperative aircraft (aircraft with a means of electronic conspicuity (transponder, TCAS, ADS-B, etc.)) and non-cooperative aircraft.
  • Some ground-based radar systems may be utilized to provide a means of meeting sense and avoid requirements.
  • Traffic Alert and Collision Avoidance System (TCAS) / Airborne Collision Avoidance System (ACAS) that employs a collision avoidance system with reactive logic, so that any maneuver resulting from a perceived threat from another aircraft will not reduce the effectiveness of a TCAS/ACAS resolution advisory maneuver from that other aircraft.
  • Automated Dependent Surveillance Broadcast System (ADS-B), with the caveat that ADS-B does not have the ability to detect non-cooperative aircraft, it is not an approved strategy, in and of itself, for mitigating the UAV sense and avoid requirements.
  • Use of multilateration, which is a type of secondary surveillance system that is based on the use of conventional transponders and stationary receivers that provide an aircraft’s position using triangulation principles.
  • Separation and Collision Avoidance Standard Operating Procedures (SOPs) addressing:
    • Take-off/launch and landing/recovery procedures;
    • En-route and terminal procedures;
    • Loss of control data link; and
    • Abort procedures following critical system failure.

I could go on, but you get the point. There’s no uber-integrated automation system for PBN and there won’t be for a long time.

Lesson 2: Major General James Poss writes about his experiences with the early days of managing military drone systems in It’s the Data Link, Stupid. He says:

A commercial drone ground relay LOS network would have advantages and disadvantages compared to the Air Force system. Advantages are that existing cell phone tower networks are ideally positioned to provide the backbone for ground relay LOS networks for commercial drones. Cell phone companies have already leased the land, dealt with all the FCC regulatory restrictions and, most importantly, obtained the spectrum that could be used for BLOS drone link operations. They also have world class cyber defense centers.  The disadvantage is that today’s providers struggle to get enough bandwidth for existing cell phone coverage as it is, their cell tower antennas point down to cover ground users, vice up to cover drones, and their 4G link reliability won’t be high enough to satisfy FAA BLOS requirements. For something as critical as BLOS drone control, the FAA won’t tolerate ‘dropped calls’.  It’s that reliability thing, again.

He goes on to say:

Problems would remain even with this type of system. Although low bandwidth directional drone links using commercially available spectrum wouldn’t use scarce 4G service spectrum, they would take up physical space on already overcrowded cellphone towers. Directional antennas are expensive and must be positioned carefully to avoid radio frequency interference.

And I’m afraid 5G (the next-generation of mobile networks beyond the 4G LTE mobile networks of today) isn’t a silver bullet. Right now, forecasters say 5G adoption will be slow and most of that extra bandwidth will be used by consumers for mobile video viewing.

But General Poss raises great points. Why would anyone invest in these systems if they’re riskier than either military drones or manned aircraft, particularly when the regulatory environment is unclear?  Just how would the FAA regulate a drone network? If the control portion of the network would be an aviation safety critical system, would the FAA even have the authority to regulate it when it’s the Federal Communication Commission’s charter to regulate cellular communications?

All I can tell you is, Buckle up and stay tuned in. It’s going to be a long bumpy ride.

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’

6 Tips for Avoiding Phony Dronie Consultants and Attorneys

How to steer clear of the wrong hire for your drone business

By Jonathan Rupprecht, Esq. for Drone Analyst®

It seems everyone is running toward the “drone” rush to make a quick buck. The way I see it is many of the consultants and attorneys assisting businesses with drone work are in reality experimenting on their clients. Many are unqualified in aviation but skilled in selling. Others have very questionable pasts that will not be mentioned in the marketing material.

Why is the drone industry attracting unqualified individuals? Some reasons:

  • newness of the industry
  • lack of organizations willing to do gate keeping at conferences
  • lack of reporters willing or knowledgeable enough to expose problems
  • few in the industry knowledgeable enough to understand the errors or seriousness of the situations
  • unwillingness to expose others because they themselves are somehow implicated

In light of these factors, you might need some help figuring out who NOT to hire. I outline six below.

1 – Google them like crazy.

Google their name. Google their company. Google everything you can about them as this will generally bring up things that might not have been mentioned in their marketing material.  You want to break down your research into two phases:

  • research articles or mentions for the period of time they started their business and going forward and
  • research articles or mentions for the period of time before they started their drone business.

Figure out when they started their company by asking them, looking up the filing date for their company name in their state’s department of corporations or looking up the whois website domain registration date. (While on that site, also write down the mailing address and name listed.)  Use that date and plug it into Google and then hit search. Then click search tools. Click anytime. Click Custom range. Now run a phase 1 and then a phase 2 search.

You additionally might want to throw in extra words to the Google search just to see if anything hits. For example, “Bob Smith liar fraud theft steal scam criminal crime arrest scandal expose court charged lawsuit.” I’ve been noticing that in phase two, all sorts of goodies pop up. They come from other industries where they have made a name for themselves and are moving into the drone industry where they don’t have a bad reputation.

2 – Find out if they had to hire someone in aviation

This is a big giveaway that they are new to the area. Following up on point one, some are from other industries and had to hire someone with an aviation background to make up for their lack of skills in the area.

In the phase 2 search, you might have noticed a lot of hits where they indicated they were in another industry. You need to figure out WHY they are no longer in that industry and now in the drone industry.

3 – Figure out their real name

I have noticed that some individuals intentionally change their first name. You might want to try variations of their first name. Another way to figure out their true name is to look up their government documents on their state’s department of corporations website. This is likely their true name. Sometimes they might have put down their true name and address on their whois domain registry. Go back and do phase 1 and 2 research with the new name.

4 – Ask around. Call their competitors and ask if they know anything

This can yield good results, and so can asking your friends what they know. There is a lot of word-of-mouth-only knowledge floating around in this industry. The reason is that some have personal knowledge but don’t want the info to go public because it will hurt them (maybe because they have a business deal with them, they didn’t do proper vetting before recommending their clients to them, etc.).

You can make these calls when you are searching for a consultant or attorney. While talking to Consultant B, you can say that you talked to Consultant A while shopping around.  See if Consultant B says anything. You have to be careful when doing this because the vibes you give off could cause you problems. If someone was asking me what I thought about another attorney, I would be thinking they are either wasting my time because they want to maybe hire the other attorney or they are a problem client and I don’t want them.

5 – Check with the state bar – especially if they claim to be an attorney

Determine how much “legal work” they are doing. Many consultants do everything under the sun, including legal work. Basically, the practice of law is applying the law to the facts at hand. The big problem with this is many consultants are committing the unlicensed practice of law, which is a crime in most states, because they are not attorneys but are applying the law to their client’s facts. They advise you on the law while they themselves break it.

It is always interesting that I have mentioned this and immediately get blowback from the consultants who claim they don’t think it is the unlicensed practice of law. Great! I have a wonderful tie breaker. Call your state bar—or better yet—their state bar, and ask them if what they are doing is the unlicensed practice of law. They aren’t doing anything wrong, right? I’m sure they won’t mind.

Most states have unlicensed practice of law committees and hotlines just for this. (Remember that this is a crime and states take it seriously.) A simple Google search for that phone number will return results. Call it and ask some questions like, “I’m a concerned consumer and I want to know if _____ is committing the unlicensed practice of law by offering a particular service they list on their website.”  This way you can get an unbiased answer on whether they are committing this crime.

Checking the state bar will sometimes show that some attorneys have been disciplined by their state bar. Sometimes it will show worse—that they are not an attorney, or they have been disbarred. I know of one situation that was relayed to me where a person was claiming to be an attorney at a drone conference, but was NOT. Let that sink in. Their attendance at a drone conference is meaningless. Conference organizers are not policemen. Furthermore, just because a website shows their advertisement doesn’t mean anything, either.

Another benefit to licensed attorneys is they have to pass background checks and maintain ethical standards according to their state bar rules; however, consultants do not have any gatekeepers doing background checks or third-party oversight to ensure ethical or legal compliance.

6 – Ask if they have insurance.

Insurance is there to protect you if they make a mistake. Some attorneys have malpractice insurance, but I have no clue how many consultants do. Checking for insurance is great way to weed out the professionals from the posers and dabblers while also making sure you are protected. See if you can get a certificate of insurance from them or call their insurance broker or insurance provider and confirm that they are insured.

Bottom line:

In conclusion, no industry will look out for you, and this applies to drones, too. You need to take care of yourself. And it’s wise to advise your friends to do their due diligence when hiring consultants or attorneys. I suggest that right after you read this, you do research on everyone you are presently in contact with or working with and send this article around to spread awareness.

Image credit – pixabay

5 Tips for Evaluating Online Drone Data Services

Choosing the right service means choosing a trusted business partner

THE FACTS:

In early 2014, it was easy to see that drones themselves (the aircraft) would quickly become commoditized and their value would come not from what they could do but from the data they collect. In a piece titled “Drones Revolution Means Big Data Cloud Services,” I wrote:

Cloud-based services are the future. You can buy a decent image-capture drone off the shelf for about $1,200 US, but that doesn’t make you an image information specialist. The first thing you need to realize is that flying a drone and taking pictures is merely the first step in the data collection process. Images need to be corrected, calibrated, processed, stored, and evaluated. For precision agriculture and mapping, data quality and post-processing are critical to getting real value from the images.

My conclusion back then was:

This is the future of small drones, and I suspect as their use and applications increase, small and medium business niche service providers will flourish.  And as they flourish these firms will differentiate themselves based on processing speed and the salience of their insights. Certainly the use of a cloud-based in-memory computing platform to accelerate analytics, processes, and predictive capabilities will be foundational to that differentiation.

So here we are in 2016, and Part 107 pilots are flourishing, but needing to differentiate – and success will come in part from the services offered the customer.

The good news is the current wave of development and innovation in online drone data services is focused on mapping and analytic solutions that drone business service providers can use to help customers solve real world problems – problems like infrastructure decay, crop yields, stockpile inaccuracies, improper construction sequencing, mining site logistics, etc. With so many choices, it can seem hard to know which one you should use. What advantage does one have over another? Unfortunately, the answers are not simple.  A lot depends on your business model, your target market, what functions you need, and quite frankly how much you are willing to spend.  With that in mind, I’ll outline below some simple criteria to help you evaluate the various web-based mapping and imaging services for drones.

THE PLAYERS:

This lists most (but not all) major cloud-based drone data service providers that are (mostly) drone agnostic:

THE TIPS:

Know your business objectives — and ensure your provider does, too. Before signing up with a drone data mapping or imaging service provider, make sure that provider is fully committed to understanding the use case and the industry vertical you serve. Not all do. Some providers have more experience in one industry vs. another. For example, they may promote the functionality to serve mining when in fact their core functionality is based on serving agriculture.

Know who’s behind the curtain – Choosing a data service provider means you are choosing a business partner. Businesses come and go, and enterprises should ask hard questions about the portability of their data to avoid lock-in or potential loss if the business fails. So, if you are interested in the long-term viability of that partner it’s always good to know who owns it, runs it, and funded it. For some vendors, this is easy.  For others it may take some digging. For example, DataMapper is owned by PrecisionHawk.  That was easy.  But did you know FarmSolutions is owned and run by the parent company of Dronifi?

Pay attention to security, not just cost — Security and cost are also significant factors. Unfortunately, comparing vendors’ costs and security prowess isn’t always easy. In many cases, it’s simply not an apples-to-apples comparison. What’s more, tracking down information related to a provider’s costs and security strategy can be tough, but here’s what you want to know:

  • Access privileges: Service providers should be able to demonstrate they enforce adequate hiring, oversight, and access controls to enforce administrative delegation.
  • Regulatory compliance: You and your enterprises client are accountable for the data you collect — even when it’s in a cloud service. You should ensure the service provider you pick is ready and willing to undergo audits.
  • Data provenance – When selecting a provider, ask where their datacenters are located and if they can commit to specific privacy requirements – especially if you are serving agriculture. The farmer will want to know.
  • Data recovery – You must make sure your service provider has the ability to do a complete restoration in the event of a disaster. Your enterprise customer will ask.

Check the box – When people ask me what’s the best drone service my answer is always “the one that best meets your particular requirements.” If you don’t already have a list of requirements, then it’s time to get cracking.  Here’s a starter list. Note that some of these may not apply to the industry you want to serve:

  • Mosaic creation
  • Ortho-rectification
  • 3D point clouds
  • Digital elevation models – including digital surface models (DSM) and digital terrain models (DTM)
  • Crop health analysis tools (like NDVI)
  • Volume measurements
  • Plan overlays
  • Change detection
  • Manual or automatic shape identification
  • Feature extraction
  • Object recognition
  • Annotations
  • Automated reporting and task management tools
  • APIs and outputs for use in GIS, CAD and building information modeling (BIM) software.
  • Audit history

Check their speeds and feeds – How fast do you want results? How do you want to see it? Do you need a preview? Do you want to access and enjoy full functionality on a mobile app, or is a using web browser all you need? These all matter – and may matter more to your client than to you.

BOTTOM LINE:

At this time, the drone industry appears to be rich with online drone data services.  Keep in mind there are data services like Aerotas, Kespry and SiteScan which are cloud-based but packaged together with drones. You may want to consider them as well.  And then there are desktop and server-based data analytic software solutions like Drone2Map for ArcGISPix4D and SimActive and Lockheed’s new Hydra Fusion Tools. These, too, may better fit your needs. Either way, you’ll want to do the same kind of evaluation because in the end they become your business partner.

EDITED 10/10/2016 – corrected Drone2Map as desktop / server app.
EDITED 10/11/20165 – added Pix4D Hybrid

Image credit: Skylogic Research

This post first appeared on DRONELIFE.com

Insights from New Market Research on Drones Sales

We just released “Drones in the Channel: 2016 Market Report,” a research study examining drone sales and distribution channels in North America. It’s the first in-depth study of drone sales channels and reveals mixed distribution tactics as well as pinpoints market share of major UAV brands.

The report is a result of a three-month project sponsored by BZ Media.  Incorporating qualitative research and including interviews with major drone manufacturers and drone distributors, the study also contains the results of a quantitative precision survey. It offers fresh insights on the major brands and the growing role that distribution and reseller businesses play in the sale of consumer and commercial drones. You can read the press release here.

Among the many insights we got from the research, these two are worth highlighting:

  1. Most drones costing more than $2,000 are purchased for professional use.
  2. DJI’s overall market share in North America is about 50 percent—not 70 percent as popularly described.

As I mentioned, part of the study was an online survey.  That survey was promoted by media partner sUAS News. It garnered responses from 783 drone buyers, so the results have a confidence level of 95% for a population of five million.

The survey found that the majority (52 percent) of people who purchase drones (at all price points) do so for photo and video taking—either for hobby or for commercial purposes.  But drilling down, our analysis found that 75 percent of drones costing more than $2,000 are bought for professional use. This includes operations for public entities (such as federal and local governments, police departments, universities, etc.) and civil operations (which includes commercial and private industry operators).

The survey also found that across all brands and all price points, DJI’s share of the North American market is 50.1 percent.  The devil, of course, is in the detail.  As you look at detailed price points, DJI’s share is both higher and lower.  For example, we found that in the $1,000 to $7,499 price range, DJI’s share is about 67 percent, but under $1,000, it’s only about 21 percent.

The 44-page report is quite comprehensive. It contains 21 figures, 9 tables and provides answers to questions like:

  • What’s the U.S. market size for all drones and growth projections by segment (cost of drones, commercial activity, etc.)
  • What’s the most popular drone brands by price point?
  • What’s the leading brand’s market share?
  • Where are people buying (e.g., online or in a store)?
  • What matters most about the purchase (e.g., price, availability of accessories, or service)?
  • What was buyers’ intended drone use—for hobby or racing or photography purposes, or for their employer?

You can find out more about the report and how to get it here.

If you have questions about what’s in the report or would like to comment on it after reading it, write me colin@droneanalyst.com.

 

Image credit: C.Snow

Six Trends Driving the Commercial Drone Market in 2016 and Beyond

“It’s tough to make predictions, especially about the future.” – attributed to Yogi Berra

I was recently asked in an interview to discuss four or five trends that I see as major drivers in the commercial drone industry today and what manufacturers and service providers might focus on in the future. That sounds simple enough for an industry analyst, but sometimes predictions are as hard as trying determine where that quote came from. It’s not an exacting science, but it’s certainly better than palm reading.

That said, here are six trends I think will drive key opportunities and challenges for drone manufacturers, service providers, and investors for 2016 and beyond. They are:

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

Fidelity

One of the major trends we are seeing in the commercial drone industry is the desire for more fidelity – that is, better image and video resolution. This is not just true for commercial drones but also consumer drones.  So, companies like DJI and Yuneec offer integrated 4K video recording cameras and HD video monitoring for as little as $1,200.  And the price keeps going down and the cameras keep getting better.  Add to that component vendors like Amimon that now offer zero latency 1080p downlinks. I could go on, but fidelity is a major driver of technology development for drones and this will continue well into the future.

A lot of this trend is being driven by the consumer. In our homes, we now have 4K TVs, HD tablets, and smartphones with higher and higher resolution, so the expectation is that a drone will deliver that or better.  As I have reported here and here, not all drone manufacturers are moving fast enough to keep up – especially the legacy defense and aerospace ones.

Sensors

In line with the drive for better fidelity is the trend for better and smaller, more lightweight sensors for drones—such as stereoscopic, ultrasonic, LiDAR, infrared, and spectral sensors.  All of these will help drones perform tasks like collision avoidance, 3D imaging infrared thermography, or improved crop vigor analysis.

The chip manufacturers get this, which is why you see companies like Intel, NVIDIA, and Qualcomm making their investments and acquisitions and while we see better onboard imaging and better co-production image processing as the investments kick into high gear.

Mobility

A third major driver in the industry right now is mobility.  I alluded to it above.  In the consumer world, the scales have tipped from PCs and TV to mobile devices.  ZenithOptimedia expects mobile devices—either tablet or smart phone—to become the main platform for viewing online video, reaching 52.7% in 2016 and 58.1% in 2017.

Not only that, but statistics on how the majority of enterprises conduct business processes and transactions is tipping toward mobile devices. IDC predicts the U.S. mobile worker population will grow over the next five years to 105.4 million in 2020 and account for nearly three quarters (72.3%) of the total U.S. workforce. One analyst predicts that by 2017 100% of all customer-facing apps and 75% of all employee apps will be built on mobile platform software first. The ‘enabled mobile worker’ is not just a PowerPoint slide title.  It’s a reality—especially in the field service and maintenance industry where drones are beginning to play a significant role.

What this means for drone manufactures and service providers is that their application development is shifting from desktop to mobile apps and, since there is no clear winner, they’ll have to develop apps that are both iOS and Android compatible and release them simultaneously if they want to stay competitive. But I can tell you most firms are struggling with this—even the big ones like DJI.

China Incorporated

Chinese companies both large and small will be dumping consumer drones on the market either to establish market share or increase it. This year’s CES, also known as the Consumer Electronics Show, was a harbinger of things to come.  It saw booths by many newcomers from China like 9 Eagles AEE, Autel Robotics, Ehang, Hexo, and ProDrone, to name a few.

A lot of these are or will be DJI clones. This is already a fun trend to watch—and one to be wary of as Eric Cheng, former Director of Aerial Imaging for DJI, has pointed out here. The problem is DJI already accounts for over 45% of registered commercial drones in the U.S. as reported here. The only other vendor capable of competing with them based on feature and price is Yuneec.

I suspect, in an effort to save a buck, commercial drone service providers will be tempted to try a clone. Ultimately, they will need to choose a compelling user experience, but given the variety and the number of competing vendors, who has time to learn a whole new technology?

Virtual and Augmented Reality

At the top of MarketWatch’s 2016 predictions: The six tech trends that will rule is the prediction that virtual reality (VR) will shine at the consumer level and augmented reality (AR) will continue to prove itself in the workplace. Virtual reality (VR) already has proven itself in video, and Trace is betting on that horse with immersive 360-degree applications for use in both commercial and consumer quadcopter drones.

But the big money is in AR. Enterprise AR apps reduce workers’ reliance on laptops and tablets where they are cumbersome to use—like in dirty or tight spaces. AR glasses enable field service technicians with a hands-free solution that provides access to visualizations of job-critical information and expert knowledge. SAP has already led the field here. Inspection drones will only add to that benefit since the video feed to the technician is really no different from AR glasses.

Competition

A lot can be said about the power of incumbent technologies (like satellite and manned aircraft) that compete with drone services. And a lot can be said about how drone leaders and service providers underestimate that power, especially in agriculture.  We have written about that topic here, and this video of Young Kim, CEO of Digital Harvest, echoes that.

But there is one part of competition in the commercial drone space that doesn’t get talk about a lot, and it’s this:  What will happen when the proposed FAA rules (aka Part 107) become law in mid-2016? My take is it will lower the barrier to entry for new manufacturers and providers.

In theories of economic competition, barriers to entry are obstacles that make it difficult to enter a given market. The term can refer to hindrances a firm faces in trying to enter a market or industry—such as government regulation and patents, or a large, established firm taking advantage of economies of scale—or those an individual faces in trying to gain entrance to a profession—such as education or licensing requirements.

If the rules come in as proposed—that is, with no pilot’s license required for the operator—then the barrier to entry for commercial drone services gets lowered.  It’s only natural that we’ll see an uptick of new entrants (they just have to take a test) and we’ll see downward price pressure.

We see this as a major disruption to the drone service provider market and those already with a business because they’ve already got a Section 333 exemption from the FAA to operate commercially.

These firms—the ones that operate legally now—will suddenly face more competition, whether their business is real estate photography or infrastructure inspection. There simply will be more drone pilots and more drone service providers, and with that the law of demand and supply kicks in. The more supply you have, the lower prices go.

You can find more of our insights on these SlideShare presentations. I’m always interested to hear your thoughts and insights about the commercial drone market. Comment or write to me at colin@droneanalyst.com.

Image credit: The Fortune Teller, by Caravaggio (1594–95; canvas; Louvre), depicting a palm reading

Commercial Drone Markets: 2015 Year in Review

What a difference a year makes.

Last year at this time, I reflected back on the news and trends of the commercial drone markets of 2014 and wrote about the mixed state of affairs in the U.S.  Back then, drones got considerable media hype and you would have thought that drones could do anything from guide your car in the wilderness, to save the planet from starvation.  In reality, we were just beginning to see the very first FAA grants of regulatory exemptions for commercial activity—which was nothing more than filming on closed sets.

Contrast that with this year, one in which we’ve seen more than 2,500 Section 333 grants for all kinds of commercial activity and the press’s narrative that ‘drones are cool’ turned to ‘drones are a headache’. Even so, there’s more going on than just public consternation.

In this post, I’ll review what I think were the six most significant commercial market trends for drones in 2015 set in the context of movies and myths.  Enjoy.

  1. Casino Royale: Venture Capital

In the 2006 movie Casino Royale, James Bond attempts to bankrupt a terrorist financier by beating him in a high-stakes poker game. The plot twists and the tournament culminates in a $115-million winning hand for Bond—who discovers later the woman he fell in love with has stolen the winnings.

Just how high is the game of drone investment?  According to CB Insights data, we’ve seen $199 million in 30 deals year-to-date. That’s more money invested in commercial drone businesses in the first nine months of this year alone than all previous years before.

These investments have been funded mostly by venture capital firms like Accel Partners, Andreessen Horowitz, and Kleiner Perkins Caufield & Byers. But other firms—like GE Ventures, Qualcomm, and Intel—are also investing to cash in on what they see are growth markets for their chips or IoT offerings.

The gold rush may be over. As pointed out here, there’s a growing sentiment that we’ve reached a precipice. Private valuation euphoria seems to be dissipating. Tech IPOs are down (and the tech startups that have gone public are generally under-performing). Volatility in broader markets is creating uncertainty.

Will these firms get stiffed like James Bond?  Some will. Just look at the offices some occupy in San Francisco (big rents!) and the high cost of high-caliber employees.  Not to mention the assumed crazy forecasts included in these firms’ business models (like the ones I’ve referenced in Diversity and Hype in Commercial Drone Market Forecasts). In 2016, we may not see a “crash and burn,” but keep your eye out for a quiet “right sizing.”

  1. Magic Carpet: Drone Air Traffic Management

In nearly all the legends and folklore, the magic carpet is used to portray the power of the carpet’s master. One legend has it that the Queen of Sheba gifted King Solomon a green and gold flying carpet studded with precious jewels. It is said that this flying carpet held spectacular powers. Made from a special type of clay with magnetic properties (and since the earth is a magnet), it held the ability to hover several hundreds of feet above the ground. With the carpet, Solomon was able to travel vast distances, but not without some big mishaps.  In legend, the carpet seems to be a metaphor for his power and reach.

A lot of companies like Amazon, BNSF, BP Google, and even Walmart, want a magic carpet, too.  They want a low-altitude air traffic management framework for drones so they can deliver goods and perform operations beyond visual light of sight (BVLOS)—and that’s exactly what NASA has promised in the Unmanned Aircraft System (UAS) Traffic Management (UTM) project. NASA’s UTM piggybacks on the FAA’s Next Generation Air Transportation System (NextGen).

The present FAA plan emphasizes use of small UAS in areas outside airport locations, which would be ‘geo-fenced’ to avoid drones interfering with large vehicle landing and take-off activities. But for all these future UTM plans, ADS-B technology (or ADS-B-like signal integration) is a key element for ‘tracking’ and reporting the position of a drone.

The problem is ADS-B use as mandated by the FAA is fraught with shortcomings.  For one, ADS-B is not mandated for use in Class G where most small drones will fly. On top of that, ADS-B “In” (the part that tells you where other aircraft are) isn’t mandated for anyone. Additionally, some pilots already feel the new activity of ADS-B distracts too much, and small aviation flyers may choose to ignore new input or not update their systems.

So, here we are working on a magic carpet solution to low-altitude flight management, and the mistake may be that we are trying to solve it with an improperly regulated flight management solution. We’ve detailed these and ten other issues in the study ADS-B and Its Use for Small Drone Traffic Management which you can read more about here. We also discussed the NASA UTM on the sUAS News Podcast: Drone Hype Cycle.

  1. Enter the Dragon: DJI

When it first looked like there could be commercial uses for drones, analysts assumed that defense avionics and electronics suppliers would lead the market because they had a head start. Then came DJI.

Often considered one of the greatest martial arts films of all time, Enter the Dragon (starring Bruce Lee) was the first Chinese martial arts film to have been produced by a major Hollywood studio, Warner Bros. The 1973 film is largely set in Hong Kong.  I think the name is a fitting description for DJI, which is headquartered in Shenzhen, China, just outside Hong Kong.  According to The Economist, the company is at the forefront of the civilian-drone industry.

DJI estimates itself to have 70 percent of the commercial market worldwide and a larger portion of the consumer market, but it really more like 50 percent.  This 50 percent number plays out when looking at FAA data.  As we reported in sUAS News, DJI is the first drone company to break the magical 1000 N registered airframes, and they still hold a commanding lead with a reported 44% market share as of December 8, 2015.

DJI continues to release new product after new product and leads other manufacturers with technology like geo-fencing and even micro investments with its SkyFund.  I predict this will continue well into the future given their current lead, their strategic partnership investment with Hasselblad, and their recent investment into an R&D facility in Palo Alto, California.

  1. Our Gang: Consumer Drone Registration

Our Gang (also known as The Little Rascals) is a series of American comedy short films about a group of poor neighborhood kids and their misadventures of saving others and sticking together. Their motto was: One for all, and all for one. And while that’s not the motto you would normally hear from such a diverse group as those on the UAS Registration Task Force Aviation Rulemaking Committee, it is the outcome.  And what an outcome it is. You can read their recommendations here. Some mainstream publications like this one are describing the consumer registration process as “becoming a pilot” or “getting a pilot’s license.” Which you’d have to do when you purchase a $200 hobbyist drone. Really?

Just as we see in the Our Gang films, the outcome is not always optimal and the methods used to get there questionable. Jonathan Rupprecht has a good analysis on the outcome here. Another analysis here calls it “ineffective and unenforceable.” To be fair there were dissenters in the group. For example, the Academy of Model Aeronautics (AMA), which is the world’s largest community-based organization, made this statement on the recommendations.

Nothing has been put in place yet, but one thing is becoming clearer: the FAA’s method to put hobby drone registration in place is specious. A thorough legal analysis by Morrison and Forrester here spells out the FAA’s procedural shortcuts and how the registry would present legal challenges and confusion for commercial drone registration.

  1. Best in Show: Drone Expos

2015 was the year we saw a proliferation of the drone conferences. These ranged from consumer to commercial expos.  I heard early from vendors who straddle both markets that they could not attend all, so they had to choose. In March I gave a quick list of criteria to help navigate the confusion in Five Tips for Navigating the Drone Expo Fad.

I reported then and Gary Mortimer reported here we are still in the ‘inflated expectation phase’ of the hype cycle for drones, so it’s anybody’s guess which conferences will shake out.  Still at every show I attended this year, these two questions came up: Which drone show was the best? And which ones will you attend next year?

The question reminds me of the comedy film Best in Show. The film follows five entrants in a prestigious dog show and focuses on the slightly surreal interactions among the various owners and handlers as they travel to the show. Afterwards, the film explores what each character is doing after the competition—and this is the real drama for drone vendors: What happens after the show?  So the better question is not about how many connections you make at the show, but are shows in general a good channel at which to engage prospects?  I think that topic (as well an exploration of distribution channels) is worthy of some Drone Analyst research in 2016. Look for more on this topic soon.

  1. Waiting for Godot: You

In the absurdist play Waiting for Godot, two bedraggled companions, Vladimir and Estragon, wait endlessly and in vain for the arrival of an unspecified person called Godot. The play opens on an outdoor scene and the weary Estragon mutters “Nothing to be done.”  When Estragon suddenly decides to leave, Vladimir reminds him that they must stay and wait for Godot. Unfortunately, the pair cannot agree on where or when they are expected to meet with this Godot. They only know to wait at a tree, and there is indeed a leafless one nearby.

For many of us, it seems we have been waiting for Godot, I mean the FAA, to finalize the rules for commercial use of small UAS. We got the Small UAS Notice of Proposed Rulemaking (NPRM) earlier this year and the 60-day public comment period closed on April 24, 2015. Sure, as noted above, we now have about 2,500 Section 333 petitions granted, but that does not make an industry.  Everyone wants to know—will Godot arrive in 2016?  The tree we wait under now is pretty much leafless, and we hope the rules will help our industry garner growth.

What should we expect in 2016?

I said this last year, and I’ll say it again.  A lot depends on the forthcoming small drone rule from the FAA.  If it looks at all like the NPRM, then the U.S. commercial market should expect moderate growth—but there will be winners and losers.  If the FAA changes it, for example lowers the altitude ceiling from 500 feet above ground level to 200 feet, then growth will be seriously hampered.

You can find more of our 2015 insights on these SlideShare presentations. I’m always interested to hear your thoughts and insights about the commercial drone market. Comment or write to me at colin@droneanalyst.com.