Drones news

Consumer drone business stumbles, but commercial markets beckon

Consumer drone business stumbles, but commercial markets beckon
Consumer drone business stumbles, but commercial markets beckon. The
<p><strong>The fledgling drone industry is in the throes of change as weak consumer demand and falling prices drive startups to shift their focus to specialized business&nbsp;applications.</strong></p> <p><strong>3D Robotics - an early drone startup that raised more than$125 million from investors - has seen its consumer business all but crash. This week, it unveiled a new commercial strategy, announcing a camera-equipped drone with imaging software designed for construction companies.</strong></p> <p><strong>GoPro Inc this week announced a recall of about 2,500 drones for a refund after just a couple of weeks on the market - some units had sudden power outages - and didn&#39;t say when it would offer a replacement product. Europe&#39;s Zano, which made mini-drones for consumers, shut down last year.</strong></p> <p>While many drone-makers overestimated demand from hobbyists, they now see big opportunities selling to businesses under newly relaxed U.S. regulations. Beyond flying robots, investors and entrepreneurs see especially&nbsp;strong&nbsp;prospects in software and services that can make aerial imaging useful for industries including insurance, construction, agriculture and entertainment.</p> <p>Companies including Amazon.com Inc and Zipline, a drone startup, are also aggressively developing drones for delivery.</p> <p>Most startups vying to sell consumer drones, often used for racing or photography, have been stung by China-based DJI. The company has dominated by slashing prices. DJI discounted its popular Phantom 3 drone, for instance, to about $300 from nearly $1,000 at the beginning of the year.</p> <p>3D&nbsp;Robotics took a beating after releasing its Solo consumer drone last year for about $1,500, said co-founder and CEO Chris Anderson.</p> <p>&quot;It&#39;s no fun watching prices fall by 70 percent in 9 months,&quot; Anderson said, referring to DJI&#39;s price-cutting.</p> <p>After shuttering warehouses and factories and laying off scores of employees, Berkeley-based 3D Robotics has all but scrapped its consumer business, Anderson said, despite having a backlog of drones sitting on Best Buy stores shelves. They now sell for one-third of their original price.</p> <p>The chill is being felt widely. Venture capital financing for drone companies fell 59 percent in the third quarter, to $55 million from $134 million in the previous year, according to data research firm CB Insights. The drop reflects a widespread funding slump across the tech sector but also heightened caution about drone companies.</p> <p>Any new company trying to compete with DJI on consumer drones would have &quot;an extraordinarily difficult argument to make&quot; to venture capitalists, said Rory O&#39;Driscoll, a partner at Scale Venture Partners.</p> <p>&quot;Consumers buy drones, and it&#39;s a disposable item,&quot; he said. &quot;They play with it, and then they are done.&quot;</p> <p>DJI, which eclipses many Silicon Valley startups with a workforce of 6,000, began making commercial drones and pursuing software development more than a year ago.</p> <p>&quot;Four years ago, it was enough to take something out of a box, you push a button and it flies,&quot; said Adam Lisberg, DJI spokesman for North America. &quot;The smart money is now in drone services.&quot;</p> <p>NEW RULES RAISE HOPES</p> <p>The industry&#39;s excitement about business applications stems in part from new Federal Aviation Administration rules, which took effect in August and offer a clearer pathway for commercial drone uses, though many restrictions remain. The new rules simplified licensing requirements, making it possible for small companies to certify themselves to operate commercial drones.</p> <p>3D Robotics&#39; new plan is to outfit the Solo with new technology to capture 3D images that show the shape, size and volume of items at a construction site.</p> <p>The company joins startups such as DroneDeploy and Airware that are focusing on software to make sense of images, whether it&#39;s the angle of a pipe laid at a new construction site or damage to a roof from a hurricane. The drone itself is almost an afterthought.</p> <p>A report in May from consulting firm PricewaterhouseCoopers estimated that, by 2020, about $127 billion worth of labor and business services could be replaced by drones. A separate report released the same month from Grand View Research projected annual sales of consumer drones globally at just $4.19 billion by 2024.</p> <p>That doesn&#39;t mean launching commercial drone businesses will be simple. Trimble Inc., which makes global positioning devices, last month spun off its line of Gatewing drones.</p> <p>Alphabet Inc has also pushed our managers and cut funding for commercial drone project, according to a Bloomberg report this week.</p> <p>And some industry experts are skeptical about 3D Robotics&#39; plan to upgrade a hobby-grade drone for commercial use.</p> <p>&quot;It might be too little too late for 3DR,&quot; said industry analyst Patrick Egan. &quot;They aren&#39;t the only company that is going to have problems.&quot;</p>