TECHNOLOGY QUARTERLY TAKING FLIGHT

Civilian drones

STARTING a riot at a football match. Revealing an unknown monument in the desert near Petra. Performing at the Super Bowl. Sneaking drugs and mobile phones into prisons. Herding elephants in Tanzania. What links this astonishing range of activities? They are all things that have been done by small flying robots, better known as drones. To most people a drone is one of two very different kinds of pilotless aircraft: a toy or a weapon. It is either a small, insect-like device that can sometimes be seen buzzing around in parks or on beaches, or a large military aircraft that deals death from the skies, allowing operators in Nevada to fire missiles at terrorist suspects in Syria. The first category, recreational drones aimed at consumers, are the more numerous by far; around 2m were sold around the world last year. The second category, military drones, account for the vast majority (nearly 90%) of worldwide spending on drones. But after a pivotal year for the civilian drone industry, an interesting space is now opening up in the middle as drones start to be put to a range of commercial uses. Last year around 110,000 drones (technically known as unmanned aerial vehicles, or UAVs) were sold for commercial use, according to Gartner, a consultancy. That figure is expected to rise to 174,000 this year and the number of consumer drones to 2.8m. Although unit sales of commercial drones are much smaller, total revenues from them are nearly twice as big as for the consumer kind.

In “Drones Reporting for Work”, published in 2016, Goldman Sachs, a bank, argued that drones are becoming “powerful business tools”. It predicted that of the total of $100bn likely to be spent on both military and civilian drones between 2016 and 2020, the commercial segment would be the fastest-growing, notably in construction (accounting for $11.2bn), agriculture ($5.9bn), insurance ($1.4bn) and infrastructure inspection ($1.1bn). Oppenheimer, another bank, predicts that the commercial market “will ultimately contribute the majority of UAV industry revenues”.

The rise of commercial drones was made possible by three developments. First, fierce competition in the consumer market has made the machines much cheaper, more reliable and more capable than they were just a few years ago. “These are not military products that were downsized—these are consumer technologies that got better,” says Brendan Schulman, head of policy at Da-Jiang Innovations (DJI), the Chinese firm that dominates the consumer-drone industry. DJI’s bestselling Mavic, which costs $999, can hold its position in light winds, detect obstacles and land automatically. At a company office in Shenzhen, Shuo Yang, one of the engineers who worked on the Mavic, proudly demonstrates that it can even respond to hand gestures to follow its owner around or snap a “drone selfie”. And it folds up to fit into a backpack.

In many ways modern consumer drones are more advanced than far more expensive military systems, says Adam Bry of Skydio, a consumer-drone startup that is developing a rival to the Mavic. The best consumer models are now being redeployed for commercial use, often with little or no modification. As previously happened with smartphones, the fastest innovation is taking place in the consumer market and then being adopted by companies. And just as with smartphones, people who enjoyed playing with consumer drones realised it made sense to take them to work too, says Jonathan Downey of Airware, a startup that makes drone-management software. Even military users are beginning to pay attention to developments in the consumer market.

Second, the proliferation of consumer drones in America prompted regulation from the Federal Aviation Administration (FAA), which had repeatedly delayed introducing rules for commercial drones. “The flood of consumer vehicles forced the regulators to allow commercial use,” says Chris Anderson of 3D Robotics, another drone startup. (Mr Anderson is a former editor-in-chief of Wired, and previously worked at The Economist.) A set of rules known as “part 107”, issued by the FAA in August 2016, specifies the conditions under which drones can be used commercially; previously commercial use had been allowed only with a special waiver that was costly and time-consuming to obtain. The default thus switched from “commercial use is illegal” to “commercial use is legal under the following conditions”. Many other countries follow the FAA’s regulatory lead, so this cleared commercial drones for take-off not just in America but worldwide. Still, “the technology is moving so fast that the regulatory and legal frameworks are having a hard time keeping up,” says Astro Teller of X, Google’s semi-secret research laboratory.

Third, the industry underwent a shake-out as a crowd of jostling startups came to be dominated by DJI. Based in Shenzhen, where the world’s technology firms go to develop and manufacture hardware, DJI outperformed both local and foreign rivals and now has about 70% of the consumer-drone market. It is valued at around $8bn and has established itself as a global, premium brand with a reputation for quality and reliability, defying the stereotype of Chinese firms. Its consumer drones generally cost $999 to start with and are subsequently discounted as new models appear. DJI also makes slightly heftier models specifically for commercial use; a fully equipped Inspire 2 costs around $6,000.

Several rival dronemakers, including Autel, GoPro, Parrot and Yuneec, have announced lay-offs in recent months. Lily, a consumer-drone startup that attracted thousands of pre-orders, shut down in January. 3D Robotics laid off 150 workers and stopped making hardware altogether last year after its Solo drone failed to dent DJI’s market share. Many drone startups concluded that instead of competing with DJI on hardware, it makes more sense to complement its products by providing software and services for commercial users. “Everyone is moving to a model where we let DJI control most of the on-board stuff and we move all our innovation up the stack to the cloud,” says Mr Anderson.

 

PHOENIX DRONE SERVICES, operating from a business park on the outskirts of Phoenix, Arizona, is typical of the small firms that have sprung up in recent years to pursue the commercial opportunities around drones. Its founders, Mark Yori and Brian Deatherage, started off by building radio-controlled planes. To stream live video, they modified a baby monitor and attached its camera to a fixed-wing drone. These were the days of “crash, smash, rebuild and try again”, Mr Deatherage recalls. Then in 2011 they used a drone-mounted smartphone to take some pictures, for which they were paid $200. “That’s a business,” Mr Yori concluded, and their company was born, one of the first permitted to operate drones commercially under a “section 333 exemption” granted by the Federal Aviation Administration.

In the company’s offices, fixed-wing and multirotor drones of various shapes and sizes hang on the walls like hunting trophies. A technician surrounded by tools and components tends to a half-built drone in a workshop area; a black DJI hexacopter sits on a table, poised like some giant insect. For years Mr Deatherage and Mr Yori built their own drones, and still use custom-built aircraft for some types of work. “In the beginning you had to be able to build and repair your own aircraft,” says Mr Deatherage, who has a computing degree and taught himself how to use the various tools to process the data from his drones.

Mr Yori likens the fast-moving drone business to surfing: “You always have to be ready to catch the next wave,” he says. There have already been several waves of enthusiasm for drones, as various industries have woken up to their potential and small firms have rushed to meet their needs. The introduction of the “part 107” rules in America last year has removed the previously formidable barrier to entry for commercial-drone operators. The industry is now looking for the most promising applications and trying to gauge how the market will evolve.

The first commercial use of drones (and still their main use for consumers) was to act as flying cameras. Over the past 150 years cameras have changed shape from bulky wood-and-brass contraptions to handheld devices and then smartphones. In many ways drones are the logical next step in their evolution. It is telling that GoPro, a company known for its indestructible action cameras, recently launched its first drone; and that DJI, the dominant maker of consumer drones, has acquired a majority stake in Hasselblad, an iconic Swedish camera firm. Using drones for photography is much cheaper than using manned helicopters. Aerial shots have proliferated on television in recent years, and are also popular with property agents and for dramatic wedding videos.

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