One of our specialties is using various rules of thumb to predict what is happening in the consumer drone market. You can find a number of our predictions and projections in our Editorial Section.
We have recently been asked by various industry parties (reporters, analysts, etc.) to comment on the US Drone market going forward. No one has a crystal ball and/or a truly accurate forecast but there are many metrics which can be used to come to reasonable projections. However, these often become confusing due to the way that most classify (or fail to classify) consumer drones. Let’s start with some basics so we can define the scope of the particular market that we (Droneflyers and much of the drone press) are covering.
Camera Drones are really the Primary Consumer RTF Market in 2016
A few short years ago, the idea of taking very stable video and pictures from a low cost drone was a dream. Those of us in the hobby rigged up various systems and were amazed when something turned out reasonably well. When we first saw truly stable video it was a shock. Now, just 2 years later, it not only is expected but has become the driving force in the consumer drone industry.
This being the case, we prefer to segment the consumer camera drone market as “purpose built stabilized drones capable of autonomy of flight (GPS) which sell for $400 – $1500.
Other industry writers tend to lump most drones together, counting a $15 toy as a unit. Granted, toy drones represent a large number of units and larger FPV models in the $120-$400 range are starting to sell well, but they still represent a small percentage of the market – especially in actual dollars. Also, the toys – and even the FPV racers – are not really drones…rather the toys are toy and the FPV/Racers are the modern equivalent of slot cars and are manually controlled.
In summary, the tendency to lump all machines together and define the market in units makes for difficulty in counting and conclusions that are of little use to those in the public, regulatory agencies and/or the industry itself.
The Dot-Drone Bust of late 2015 and 2016
The Drone industry seems a magnet to dreamers, schemers and snake oil salespeople who can easily take advantage of a clueless public and/or investors. Such is the often the case with any new and complex products – as it takes a while before the mass of people understand what is real and what is PR and a sales pitch. The Drone Revolution is very real – as was the PC revolution. However, it took decades for many of the real promises of personal computing to mature. The same will be true of aerial robotics.
A combination of bad press combined with poor decisions by the FAA and the Drone Industry representatives and lobbyists caused a large cloud to hang over sales and adoption in November/December 2015 and continuing into 2016. This “dot-drone” bust will likely continue until a clear path forward is delineated by the FAA and Industry representatives.
A Simple Take on 2016 Camera Drone Sales in the USA
Cutting through the explanations before and after this prediction, here is a simple statement regarding camera drone sales in the USA in 2016. The market, in units, is likely to increase by 30-50%. However, the market in dollars is likely to be stable or even possibly decline. This can be worked out with some simple math.
Taking a rough figure of 400,000 consumer camera drones sold in the USA in 2015 (article here), let’s place a retail number (average sale price) on these machines of approx. $1,100. This number is easily arrived at by averaging the cost of the various popular models of that year and confirmed by our own experience with our Amazon and other affiliate sales. In slightly more detail, average ticket price was about $1400 at the start of 2015 and closer to $1000 during the Holiday season.
In 2017, things have changed. The largest selling camera drone is now the Phantom 3 Standard at a price currently below $500 – maybe $600 with an extra battery. Other models have come down in price so that a current average sale is probably approx. $800 and will likely be $700 before the end of 2016. If we take an average of $750 for 2016 vs. $1100 for 2015, that would mean an increase of 40% in units would result in no increase in dollars!
Stated simply, our prediction for 2016 is NO increase in dollar volume at either the wholesale or consumer retail level.
In terms of numbers, this is perhaps up to 600,000 units in this segment and 425,000,000 at retail. This would compare to 400K and approx. the same number of dollars in 2015.
Does this mean the Drone Business is Finished? What can drive it going forward?
Aerial Robotics of all sorts has a bright future. But the industry and the FAA have colluded to shoot themselves in the foot on a temporary basis. In addition, other market forces are at work which are suppressing unit sales and, more importantly, dollar volume…..specifically:
1. Drone makers such as DJI are driving prices so low that they are effectively cutting the floor out from under themselves. Some of this is an over-reaction to perceived competition. This may work in the short term but once consumer are accustomed to $400 camera drones it will be difficult to convince them to spend $1000 plus.
2. Good Enough is often Good Enough – the first true consumer quadcopter which was truly complete, reliable and capable was the Phantom 2 Vision+ (V3.0). This was a fine machine and capable of doing most of what hobbyists and consumers desired. The Phantom 3 was, in effect, a perfection of the same type of machine…delivering most of what current consumers desire. One year after its launch, it remains more than good enough for most – meaning that the owners of these are not predisposed to spend more money and step up to new machines. Think of it like the iPhone 5s. It works.
3. Shortage of New Consumers – the FAA and other forces have conspired to slow down the rate of brand new entrants into this hobby. The barriers presented to even low-cost small commercial work (roof inspection, etc.) has meant that there are no “killer apps” bringing hordes of new prospects into the hobby and pursuit.
4. The Technology is on a plateau – Replacement sales will be largely driven by new capabilities of two types – one is the quality of the camera and the second is advances in computer vision and autonomy. The single new entrant in the market with both of these is the DJI Phantom 4 – BUT, the camera is barely better than the Phantom 3 and the computer vision, while very cool, is not yet mature to where it is a “must have” for owners of older machines.
5. Market Excitement – In 2015 the Phantom 3 Series, the 3DR Solo and the Yuneec 4K were all introduced – bring massive media campaigns and new features to the market. All of these product launches generated excitement…and new sales. 2016 has seen much less in newly introduced models. This will change somewhat with the release of the GoPro Karma Drone, slated for June 2016. The key is whether all the new models such as the Karma, the Yuneec H and the Phantom 4 will continue to drive >$1K unit sales right through the end of the year.
2017 and Beyond
“The further a squirrel goes out on a limb, the shakier it gets”. In the drone business, long term predictions are truly guesswork. They contain a lot of “ifs and buts”, but the basics discussed above still apply. Drone buyers in the $400-$1500 market segment have money in their pockets and are ready to buy…given a good enough reason to do so. If manufacturers provide better cameras and more features, they will part with their hard earned money.
The bigger picture is, well, quite big. Consumer models will likely be doing a lot of small commercial and agricultural work in the future – assuming that the FAA and other licensing and regs allow it. This immediately opens up a market of another million or two consumer priced models…and, of course, all of those models will then add to the user base which needs replacing and upgrading every couple of years. If, for example, we end up with 5 million consumer camera drones in the hands of the public…and most are at about a 2 year replacement cycle, that alone would represent a LOT of new unit sales. When you work out these numbers it’s easier to see why companies like DJI are being so aggressive and competitive.
It still remains to be seen whether the US Consumer Camera Drone market will be a competitive landscape – or, as now, more of a “Xerox is the brand name of a copier” landscape where one or two behemoths represent 80% plus of unit sales. Our guess is that prevailing forces favor 3 companies in total, at most, being a solid part of this segment.
Thanks for reading and please enter your comments and predictions below!