Judging by the headlines, 2014 turned out to be the year for drones. I referenced in Tweets a total of 503 articles with the word \u2018drones\u2019 in the headline last year. \u00a0A Google search brings up about 61.4 million results referring to \u2018drones.\u2019\u00a0 Granted, that search includes references to military and hobby drones, but it still delivers higher results than other years.<\/p>\n
If the first theme of 2014 was the rise in popularity of drones, the second theme was how hamstrung the commercial markets are in the U.S. because of a lack of regulations. But there\u2019s more going on than the buzz and frustration with FAA progress; in this post, I\u2019ll review what I think were the five most significant commercial market trends for drones in 2014.<\/p>\n
As mentioned, 2014 brought lots of hype about drones in the media, and investors can\u2019t tell fact from fiction.\u00a0 Here\u2019s<\/a> one example where a writer and industry analyst asserts that the civilian commercial market for unmanned aircraft systems (UAS) will dwarf that of the military. But the evidence shows otherwise. My colleague Mitch Solomon summarizes the problem well in this article<\/a>:<\/p>\n \u201cVenture investors have a huge variety of questions about the commercial drone market, but two stand out in terms of their importance.\u00a0 The first is: what is hype and what is reality?\u00a0 Put another way, is this market really a big, high growth, high margin market?\u00a0 If you rely solely upon media hype and AUVSI [fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][Association of Unmanned Vehicle Systems International], your answer would be an unequivocal: yes, the commercial drone market is the biggest, highest growth, best new market opportunity to come along in decades (or maybe centuries\u2026AUVSI shows the US commercial market at over $1 billion in the first year after regulations are approved by the FAA.\u00a0 (Really?!).\u201d<\/p><\/blockquote>\n Like Mitch, I\u2019m not so quick to buy the media hype or AUVSI\u2019s forecast (for more on that, see this article<\/a>), and my market view is much more pragmatic and measured. Still, if tier-one venture investors are asking questions about the hype, then that is a good sign. It means that while there is interest in the space, investors will need to work smarter to make sure capital won\u2019t be wasted chasing fictional opportunities.<\/p>\n While drone inspections of land-based refinery flare stacks have been permitted in other countries for some time, it wasn\u2019t until June of this year that the FAA granted permission for the first commercial drone for this industry in the U.S.\u00a0 Problem is, it wasn\u2019t for the same purpose. That permission went to oil company BP and drone manufacturer AeroVironment to fly aerial surveys of over Alaska’s North Slope.<\/p>\n The lack of real-world consequence of this permission is best stated in this article<\/a>. Until June, the FAA has approved drones for public safety, such as police or firefighters, or for academic research, on a case-by-case basis. Most of those cases were for use cases similar to flare stack inspections (perch and stare) and were for small, versatile drones with relatively low-cost technology.\u00a0 But this was for an expensive 10-year-old military spec fixed-wing drone that has limited commercial viability. As the article states:<\/p>\n \u201cThe FAA is essentially using the military’s prior experience with this specific drone platform in place of the agency’s airworthiness certification requirements, so it is not an option for people hoping to use the newer drones being designed by high-tech startups that are not involved in military applications,” [Brendan] Schulman said. “It is a small step in the right direction but really only for companies who want to operate in very remote locations using military surplus equipment.”<\/p><\/blockquote>\n As this research<\/a> points out, filmmaking, video, and photography drones have flown commercially without FAA authorization for years now.\u00a0 It\u2019s no surprise, then, that this is the biggest and most mature commercial market for drones. Notwithstanding, drone regulation was among many issues the Motion Picture Association of America (MPAA) lobbied on in 2012 and 2013, at a total cost of $4.11 million. The MPAA has been constantly appealing to the FAA to let them use smaller drones for film-making purposes. It seems that lobbying paid off.\u00a0 In September, the FAA granted <\/a>regulatory exemptions to six TV and film production companies to operate drones on sets: Astraeus Aerial, Aerial MOB, HeliVideo Productions, Pictorvision, RC Pro Productions Consulting, and Snaproll Media.<\/p>\n There is a catch here.\u00a0 Operators are required to hold private pilot certificates. This has many scratching their heads.\u00a0 Why do commercial remote control operators need to learn how to land a Cessna when they\u2019ve been operating these drones safely for years as \u2018hobbyists\u2019 without that requirement?<\/p>\n A reality check is an assessment to determine if one’s circumstances or expectations conform to reality.\u00a0 This certainly is the case with the market for agricultural drones.\u00a0 It needed a reality check because of the hype created by AUVSI study titled The Economic Impact of Unmanned Aircraft Systems Integration in the United States<\/a>. It claims precision agriculture and public safety will make up more than 90% of the market growth for unmanned aerial systems. The report confidently states, \u201c\u2026the commercial agriculture market is by far the largest segment, dwarfing all others.\u201d\u00a0 To this day, that fiction gets repeated over and over again in the media.<\/p>\n The market potential for drones in precision agriculture needs vetting\u2014see Film or Farm: Which is the Bigger Drone Market? \u2013 Part 2<\/a> for my thoughts on this. It\u2019s not yet clear how a UAS can deliver more usable data to a farmer or provides a cost benefit over the existing image solutions available to them today. But don\u2019t take my word for it–watch this video<\/a> of Rory Paul at the 2014 sUSB Expo for his take on the misconceptions about this market.<\/p>\n Back in the spring, GIS software market leader Esri published this article<\/a> about how drones greatly benefit the work of professional surveyors and mappers.\u00a0 Devon Humphrey states it clearly:<\/p>\n “Due to the unique flight characteristics of UAVs, the imagery is sharper and offers some unique advantages. This means that the camera captures high ground resolution on the order of two to five centimeters. In addition, because there is a large amount of overlap in the imagery, digital photogrammetric processing results in 3D point clouds of similar resolution. Turnaround time is a few hours, instead of days, weeks, or months in the case of traditional delivery times. The user also controls the process rather than working with an outside vendor or being stuck using “day-old donuts,” generic imagery that doesn’t meet the temporal requirements.”<\/p><\/blockquote>\n He is not alone in that assessment<\/a>. I think this market is heating up to become the second biggest commercial drone market behind aerial photography and cinema and ahead of precision agriculture. In a nutshell, I believe the GIS market will continue to grow rapidly because drones provide a technical advantage over incumbent aerial technology and incumbent technology costs more.<\/p>\n What should we expect in 2015? <\/strong><\/p>\n A lot depends on the forthcoming small drone rule from the FAA.\u00a0 If it looks at all like the exemptions granted this year (which have onerous restrictions), then U.S. commercial market growth will be seriously hampered.\u00a0 This should be no surprise to anyone.\u00a0 Much has been written on how government regulations hinder economic growth (for example here<\/a> and here<\/a>).\u00a0 Still, in other countries with smarter regulations, expect these and other markets to continue to flourish and those over here will be looking at the success stories with envy.<\/p>\n You can find more insights from 2014 on these<\/a> SlideShare presentations.\u00a0 I would love to hear your thoughts about the commercial drone markets. Feel free to comment or write me at colin@droneanalyst.com<\/a>.<\/p>\n Image credit: Shutterstock[\/fusion_builder_column][\/fusion_builder_row][\/fusion_builder_container]<\/p>\n","protected":false},"excerpt":{"rendered":"\n
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