Only Up From Here: Drone Market Expected to Expand in 2017

As 2016 saw the dramatic price drop and easing of federal drone regulations, many project even more success this coming year.

by Aaron Aupperlee, The Pittsburgh Tribune-Review / January 11, 2017
Photo Courtesy of Shutterstock

(TNS) -- Drones became metal detectors in the sky, put to use by mining and oil and gas companies. Their cost dropped dramatically. And the Federal Aviation Administration relaxed regulations on flying commercial drones, making it easier to take to the skies.

 

Commercial drone use for surveying, agriculture, industrial and infrastructure inspection, transportation and more took off in 2016, translating into a good year for the bottom lines of several Western Pennsylvania companies.

"Drones are the name of the game now," said Dick Zhang, founder and CEO of Identified Technologies.

Identified Technologies, which makes software and sensor packages for drones, will announce Wednesday that its revenues grew 900 percent in 2016. Zhang declined to discuss specific revenue figures. He says the Larimer-based company had to hire 15 employees during the year to keep pace and saw its customer base quadruple.

The commercial drone market is expected to continue to grow. PwC, formerly PricewaterhouseCoopers, predicted the commercial drone market could grow from about $2 billion now to more than $127 billion by 2020, according to a report it released in May. The FAA estimated the nation's fleet of commercial drones will grow from 32,800 in 2016 to 542,500 in 2020, according to its most recent forecast.

Ned Renzi, a partner at venture capital firm Birchmere Ventures and chairman of Identified Technologies' board of directors, said hype around commercial drones hit its peak in 2015 and 2016. The Gartner Hype Cycle, a graphic used by information and technology research firm Gartner Inc., puts drones at the front end of its "Peak of Inflated Expectations."

"In 2017 and 2018, we'll shake out who adds value and who doesn't," Renzi said.

Many drone companies are funded with seed money, and investors are waiting to see who gets traction in the marketplace before investing further, Renzi said.

Sanjiv Singh, CEO of Bloomfield-based Near Earth Autonomy, said 2016 was a good year for his company. The company also develops software and sensor packages for drones and grew to more than 40 employees. It had four in 2012, Singh said. The cost of drones dropped tenfold during the year, putting professional-grade drones and sophisticated consumer-level models in reach. The $100,000 drone needed to lift a five-pound payload a few years ago now costs about $10,000. The $10,000 drone needed to lift a small camera is now $1,000.

Singh said the price reduction allowed his firm to buy a few $1,000 drones to take high-resolution video of drones with their software or sensors in action.

The FAA gave the commercial drone industry its biggest boon at the end of August when it relaxed regulations on drone operators, including one requiring them to have federal permission or to be licensed. The new drone regulations opened up the industry, but Luke Wylie, CEO and founder of the Butler County-based US Aerial Video, said its full effect has yet to be felt.

"We're still in transition," Wylie said. "I don't think it's been a eureka moment."

Wylie said the regulation changes occurred just as drone season was winding down. Most imaging, mapping, surveying and inspection work with drones happens in the spring and summer, Wylie said. The green grass, blue skies, lush foliage and lack of snow make it attractive for promotional imaging. Mapping and surveying results can be skewed by snow, Wylie said. And drones don't fly as well when it's cold. Their batteries drain quickly.

Wylie said US Aerial Video experienced steady growth in 2016 as it strengthened partnerships with its existing companies. Customers called routinely, asking his fleet of drones to perform new tasks. Wylie outfitted a drone with a magnetometer during the year, turning the drone into a flying metal detector, and flew it for mining and oil and gas companies.

Civil & Environmental Consultants increased the number of drone pilots in its Robinson office from one to five after the FAA changed the regulations, said Rick Celender, a vice president of civil engineering. He said the office had about a 25 percent increase in clients and business in 2016.

"It seems like the industry has embraced the technology with a little more vigor," Celender said. "I think folks are really coming to grips with what this technology can do."

The firm flew drones for real estate and mining companies. It took its drones and other 3-D survey equipment to the Italian city of Volterra to map and photograph it. It even offered up 15 "sacrificial drones" to go inside an Ohio warehouse and look for radioactive material before demolition.

Celender said he would rather lose 15 drones at $1,200 apiece than have people put their lives at risk. The proposal is pending, he said.

©2017 The Pittsburgh Tribune-Review (Greensburg, Pa.) Distributed by Tribune Content Agency, LLC.