What a difference a year makes.<\/p>\n
Last year at this time, I reflected back on the news and trends of the commercial drone markets of 2014<\/a> and wrote about the mixed state of affairs in the U.S.\u00a0 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.\u00a0 In reality, we were just beginning to see the very first FAA grants of regulatory exemptions for commercial activity\u2014which was nothing more than filming on closed sets.<\/p>\n Contrast that with this year, one in which we\u2019ve seen more than 2,500 Section 333<\/a> grants for all kinds of commercial activity and the press\u2019s narrative that \u2018drones are cool<\/a>\u2019 turned to \u2018drones are a headache<\/a>\u2019. Even so, there\u2019s more going on than just public consternation.<\/p>\n In this post, I\u2019ll review what I think were the six most significant commercial market trends for drones in 2015 set in the context of movies and myths.\u00a0 Enjoy.<\/p>\n In the 2006 movie Casino Royale<\/a>, 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\u2014who discovers later the woman he fell in love with has stolen the winnings.<\/p>\n Just how high is the game of drone investment?\u00a0 According to CB Insights data, <\/a>we\u2019ve seen $199 million in 30 deals year-to-date. That\u2019s more money invested in commercial drone businesses in the first nine months of this year alone than all previous years before.<\/p>\n These investments have been funded mostly by venture capital firms like Accel Partners<\/a>, Andreessen Horowitz<\/a>, and Kleiner Perkins Caufield & Byers<\/a>. But other firms\u2014like GE Ventures, Qualcomm, and Intel\u2014are also investing to cash in on what they see are growth markets for their chips or IoT offerings.<\/p>\n The gold rush may be over. As pointed out here<\/a>, there\u2019s a growing sentiment that we\u2019ve 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.<\/p>\n Will these firms get stiffed like James Bond?\u00a0 Some will. Just look at the offices some occupy in San Francisco (big rents!) and the high cost of high-caliber employees.\u00a0 Not to mention the assumed crazy forecasts included in these firms\u2019 business models (like the ones I\u2019ve referenced in Diversity and Hype in Commercial Drone Market Forecasts<\/em><\/a>)<\/em>. In 2016, we may not see a \u201ccrash and burn,\u201d but keep your eye out for a quiet \u201cright sizing.\u201d<\/p>\n In nearly all the legends and folklore, the magic carpet is used to portray the power of the carpet\u2019s 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<\/a>.\u00a0 In legend, the carpet seems to be a metaphor for his power and reach.<\/p>\n A lot of companies like Amazon, BNSF, BP Google, and even Walmart, want a magic carpet, too.\u00a0 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)\u2014and that\u2019s exactly what NASA has promised in the Unmanned Aircraft System (UAS) Traffic Management (UTM<\/a>) project. NASA\u2019s UTM piggybacks on the FAA\u2019s Next Generation Air Transportation System (NextGen<\/a>).<\/p>\n The present FAA plan emphasizes use of small UAS in areas outside airport locations, which would be \u2018geo-fenced\u2019 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 \u2018tracking\u2019 and reporting the position of a drone.<\/p>\n The problem is ADS-B use as mandated by the FAA is fraught with shortcomings.\u00a0 For one, ADS-B is not mandated for use in Class G where most small drones will fly. On top of that, ADS-B \u201cIn\u201d (the part that tells you where other aircraft are) isn\u2019t 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.<\/p>\n 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\u2019ve detailed these and ten other issues in the study ADS-B and Its Use for Small Drone Traffic Management<\/em> which you can read more about here<\/a>. We also discussed the NASA UTM on the sUAS News Podcast: Drone Hype Cycle<\/a>.<\/p>\n When it first looked like there could be commercial uses for drones, analysts assumed<\/a> that defense avionics and electronics suppliers would lead the market because they had a head start. Then came DJI.<\/p>\n Often considered one of the greatest martial arts films of all time, Enter the Dragon<\/a> (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.\u00a0 I think the name is a fitting description for DJI<\/a>, which is headquartered in Shenzhen, China, just outside Hong Kong.\u00a0 According to The Economist<\/a>, the company is at the forefront of the civilian-drone industry.<\/p>\n DJI estimates<\/a> 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.\u00a0 This 50 percent number plays out when looking at FAA data. \u00a0As we reported in sUAS News, DJI is the first drone company to break the magical 1000 N registered airframes<\/a>, and they still hold a commanding lead with a reported<\/a> 44% market share as of December 8, 2015.<\/p>\n DJI continues to release new product<\/a> after new product<\/a> and leads other manufacturers with technology like geo-fencing<\/a> and even micro investments with its SkyFund<\/a>.\u00a0 I predict this will continue well into the future given their current lead, their strategic partnership investment with Hasselblad<\/a>, and their recent investment into an R&D facility<\/a> in Palo Alto, California.<\/p>\n Our Gang<\/a> (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\u2019s 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.\u00a0 And what an outcome it is. You can read their recommendations here<\/a>. Some mainstream publications like this one<\/a> are describing the consumer registration process as “becoming a pilot” or “getting a pilot\u2019s license.” Which you\u2019d have to do when you purchase a $200 hobbyist drone. Really?<\/p>\n 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<\/a>. Another analysis here<\/a> calls it \u201cineffective and unenforceable.\u201d To be fair there were dissenters in the group. For example, the Academy of Model Aeronautics (AMA), which is the world\u2019s largest community-based organization, made this statement<\/a> on the recommendations.<\/p>\n Nothing has been put in place yet, but one thing is becoming clearer: the FAA\u2019s method to put hobby drone registration in place is specious. A thorough legal analysis by Morrison and Forrester here<\/a> spells out the FAA\u2019s procedural shortcuts and how the registry would present legal challenges and confusion for commercial drone registration.<\/p>\n 2015 was the year we saw a proliferation of the drone conferences. These ranged from consumer to commercial expos.\u00a0 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.<\/em><\/a><\/p>\n I reported then and Gary Mortimer reported here<\/a> we are still in the \u2018inflated expectation phase\u2019 of the hype cycle for drones, so it\u2019s anybody\u2019s guess which conferences will shake out.\u00a0 Still at every show I attended this year<\/a>, these two questions came up: Which drone show was the best? And which ones will you attend next year?<\/p>\n The question reminds me of the comedy film Best in Show<\/a>. 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\u2014and this is the real drama for drone vendors: What happens after the show?\u00a0 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?\u00a0 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.<\/p>\n In the absurdist play Waiting for Godot<\/a>, 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.” \u00a0When 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.<\/p>\n 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.\u00a0 Everyone wants to know\u2014will Godot arrive in 2016?\u00a0 The tree we wait under now is pretty much leafless, and we hope the rules will help our industry garner growth.<\/p>\n What should we expect in 2016? <\/strong><\/p>\n I said this last year, and I\u2019ll say it again.\u00a0 A lot depends on the forthcoming small drone rule from the FAA.\u00a0 If it looks at all like the NPRM, then the U.S. commercial market should expect moderate growth\u2014but there will be winners and losers<\/a>.\u00a0 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.<\/p>\n You can find more of our 2015 insights on these<\/a> SlideShare presentations. I\u2019m always interested to hear your thoughts and insights about the commercial drone market. Comment or write to me at colin@droneanalyst.com<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"\n
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