Shakeups Pave Way for Future of Commercial Drone Sector


The commercial drone industry has seen its fair share of shakeups and challenges over the past few years, but these disruptions may ultimately help pave the way for a more stable and successful future. Here is a look at some of the key events that have impacted the sector, the lessons that can be learned, and what the future may hold as the industry matures.

The Early Days

The era of commercial drones really took off around 2013-2014, when the Federal Aviation Administration (FAA) began granting more exemptions and permits for companies to operate drones for purposes like aerial photography, infrastructure inspection, and more. Investors eagerly poured money into drone startups hoping to stake an early claim in what was widely seen as a massive growth opportunity.

However, the industry soon faced a reality check. The regulations around commercial drones were still complex and restrictive. Technical limitations of early drone models made many proposed applications impractical. And the challenges of scaling up drone operations, training pilots, and making the economics work all proved greater than many startups expected.

The Fallout

By 2016-2017, it became clear that the industry’s growth trajectory would be slower and more uneven than anticipated. Many drone startups failed entirely or pivoted to try and find more viable business models. Early investors lost money, and investment dried up. Even prominent companies like Airware and 3DR struggled and underwent layoffs.

This period saw a kind of “dot-com bust” for drones, causing some skepticism about whether drones were just an overhyped fad. But the shakeout was probably inevitable for a young industry still working to match its capabilities to real customer needs and sustainable business models.

Regulatory Progress

On the regulatory side, progress was slow but steady. In 2016, the FAA introduced its Part 107 rules, which provided a clearer framework for commercial drone operations in the US. No longer did companies need special exemptions – they could follow a uniform set of safety, licensing and operational requirements.

The FAA has gradually approved more advanced operations like flying drones beyond line of sight. Regulators in other countries like Canada, the UK and Australia have also taken steps to accommodate drones and support innovation in the sector.

There is still room for improvement around things like remote identification and expanded airspace access. But the regulatory environment has gone from highly restrictive to cautiously permissive – a necessary evolution for the industry to grow.

Use Cases Emerge

On the business side, real-world experience helped identify the most promising commercial applications for drone technology. Areas like surveying and mapping, infrastructure inspection, agriculture, and public safety have emerged as strong early use cases where drones offer clear value over existing methods.

Companies have developed specialized drone hardware, software, sensors, and analytics tailored to customers’ needs in these segments. And enterprise organizations are increasingly adopting drone programs as the benefits become proven and the operations are more standardized.

There is still room to unlock more applications, but drones have carved out important footholds in several multi-billion dollar industries. The opportunity is big enough even with early focus on a limited set of use cases.

Consolidation and Specialization

The remaining drone manufacturers and software providers are competing to serve these growing enterprise markets. The shakeout has yielded a smaller set of more dominant, stable and mature technology players.

Chinese drone giant DJI alone now accounts for over 70% of consumer and enterprise drone sales. Other leaders include senseFly, Wingtra, Parrot and Skydio on the hardware side, and DroneDeploy, PrecisionHawk and Airware on the software side. We’ve also seen consolidation via acquisitions, such as Verizon buying Skyward and Deere buying Blue River Technology.

This consolidation is normal as industries evolve from scattered startups to steady leading providers. A few dominant drone platforms may emerge comparable to iOS or Android in mobile. More specialization and segmentation of hardware and software capabilities for different use cases is also likely.

New Business Models

The early days saw a mania around building large drone service provider networks, essentially trying to Uber-ize drones before the technology was ready. But new models have emerged for unlocking the technology’s value.

Companies are having most success selling drones directly to enterprise customers and enabling them to manage their own programs. A growing trend is for hardware and software vendors to partner closely and bundle their offerings. Some providers operate their own drone services or provide turnkey programs for customers.

There are also attempts to offer “drone-as-a-service” via subscription business models that overcome the high upfront costs of drones. And consumer models pioneered by DJI will drive broader adoption and private sector innovation.

These kinds of offerings make drones more accessible and lower the barriers to productive adoption. They represent maturing business models tailored to demand.

The Future Outlook

While the early hype was excessive, the core opportunity remains vast. MarketsandMarkets predicts over $63 billion in annual spending on commercial drones by 2025. Tractica projects the total drone services market will reach $8.4 billion by the same year.

Drones have proven their ability to save money, save time, and create new capabilities for enterprises. As the technology improves and gets woven more broadly into operations, drones will transition from novelties to indispensable business tools.

New hardware, sensors, autonomy capabilities, and software tools will expand drones’ versatility and ease of use. Regulatory access will continue incrementally growing. Service models will better match customer needs and make adoption simpler.

For investors and startups, there are probably still some market segments underserved by current providers or offerings. Enterprise markets remain fragmented across industries and geographies, offering room for focused providers to build drone-centered businesses. Consumer drones and services have ample scope for growth and innovation as well.

The drone shakeups have separated long-term winners from transitional players, allowed real-world capabilities to catch up with early hype, and filtered out unsustainable business models. Amid the challenges, the supporting infrastructure has steadily strengthened.

The industry is now poised for less dramatic but more consistent growth built on real demonstrated value, paving the way for drones to become a standard business tool within the next decade.

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