XPONENTIAL is the largest professional unmanned systems show in the world, and as you can imagine, there was an assortment of news and updates that were made public as it kicked off. AUVSI hosted the event in New Orleans from May 2nd-May 5th, and organizations of every size all the way up to and including the FAA itself made sure to tie in their major announcements with it.
One item from the barrage of news and information that caught my attention was the release of the first In-depth research of drone sales. It’s easy to focus on the potential and possibilities that exist in various industries for these tools, but where and how are they being purchased and used? What sorts of people are purchasing them, and what actually is the most popular drone? These are just a few of the questions that the team at Skylogic Research answered in the newly released, “Drones in the Channel: 2016 Market Report.”
Colin Snow is the CEO and Founder of Skylogic Research, and he has already shared some insights from the report on his site. Even with that info readily available, he was kind enough to run through a number of questions I had that relate to some of the details which are laid out in the 44-page report. Find out what he had to say about what surprised him the most, what info in the report as it relates to the FAA’s Section 333 grants are most relevant to drone business service providers plus more by reading the interview below or discovering further details about the report itself here.
Jeremiah Karpowicz: Do the findings in this report fall in line with expectations you had going into this project based on the trends and growth you’ve seen in the drone industry?
Colin Snow: Yes, the findings do fall in line with what our research has been telling us all along – especially when it comes to industry trends. For example, back in May 2014, our “Impact of FAA Rules on sUAS Business” study evaluated commercial business service providers’ offerings. It found that aerial photography and/or video combined with cinematography / movie/ TV would dominant service offerings and that agriculture / farming services would lag. This current research finds the same trend and also reveals the majority of professionals purchase drones for photo and video and only a small minority do so for agriculture use.
Part of this research was to produce a realistic growth forecast. We have never subscribed to the massive growth projections offered by firms that are not close to this industry and even think that sales forecasts from Consumer Technology Association (CTA) are optimistic. Future sales depend a lot on final FAA regulations for small unmanned aircraft systems (UAS). Under the most favorable scenario, we project 2016 U.S. unit volume sales to dealers to be 2.85M and resulting shipment revenues to come in at or above $1.5B.
What did you find to be the most surprising aspect or element of the answers and feedback you received?
We looked at where buyers purchase drones. We found that three channels dominate drone sales: Dedicated drone dealer/distributors, direct from the manufacturer, and Amazon or eBay. So we were surprised that general hobby stores account for only 10 percent of sales and that combined big-box retailers (general merchandise and electronic stores like Walmart, Target, and Best Buy) and general camera / audio / video retailers (like B&H and Sammy’s Camera) account for a small portion of channel sales (10 percent).
I think the other surprising aspect of our study is in the feedback we have received on DJI’s market share. The public has been told for several years now that DJI has a two-thirds market share. Some news articles and even their executives claim they have a 75% market share. So when we published our results showing that that DJI has only a 50% overall market share across all price points in North America, it was received with disbelief. Mind you DJI is the dominate player and our research backs this up, but as the saying goes: “If you report a data point big enough and keep repeating it, people will eventually come to believe it.”
I know that your report has a detailed analysis around undefined terms like ‘consumer,’ ‘prosumer,’ and ‘professional’ drones. How have you seen the interpretation of these terms impact both sides of the market?
Wow. You know those terms get bantered about and no one even blinks an eye. And each speaker or writer uses them in a completely undefined fashion and assumes the audience knows what they mean. We approached this research without preconceptions about these terms. Our approach was simple. Since all drones sold—no matter what the price point—are purchased by a consumer, we sorted these terms by looking at the purchaser’s intended use. So we asked two separate questions: 1) what did you pay for your drone, and 2) what will you use it for? From this we were able to glean very useful insights about why they purchased a drone and what FAA UAS Operation Type it would fall under—was it for public, civil, or recreational use. The results show that across all price points more one-half (57%) say they intend to use their drone for professional purposes—either governmental or commercial. The results also show that “prosumer” is a very narrow category ($1,000 to $2,000), and that the majority of buyers in this category (61%) purchase their drone with either civil / commercial or public / governmental use in mind.
You mentioned that 75 percent of drones costing more than $2,000 are bought for professional use. Is this because serious professionals want to use serious tools, or because many hobbyists realize they can purchase a UAV that does what they want and need for substantially less than $2,000?
There is very blurry line between hobbyist and professional use for drones once you get above $500. There is also downward price pressure in the market as new Chinese players begin to distribute in North America. In general, drones purchased for less than $1,000 are for hobby use and more than $2,000 are for professional use. However, the feature set for drones under $1,000 gets better as the months go by and as better technology like obstacle avoidance and object tracking become standard features. For example, a DJI Phantom 3 Pro sold and was used by professionals at $1,400 because – at the time it was released – it represented the most advanced feature 4K camera drone. It now sells for under $1,000 and the Phantom 4 (which has the new obstacle avoidance and object tracking features) takes the $1,400 spot.
Are there any insights in the report on the FAA’s Section 333 grants that could benefit drone business service providers?
We have a whole section on the growth and drone statistics gleaned from FAA exemption grants. At the time we wrote the report, more than 4,200 commercial and civil entities and individuals have obtained permission, through FAA Section 333 exemptions, to fly drones for commercial operations in the U.S. By examining the exemptions, we are able to gain a clear view of the shape that the industry is likely to take in the near future.
The future of the industry is directly influenced by what’s happening right now, and that future is set to arrive sooner than anyone realizes. Drone technology and applications are changing before our eyes, which makes understanding the specifics of what the current landscape looks like all the more important. Big thanks to Colin for making this picture that much clearer.
Find out more about the report right here.