KEY POINTS

  • The global commercial drone market will take shape around applications in a handful of industries: agriculture, energy, utilities, mining, construction, real estate, news media, and film production. Within five years, drone use will be routine in these areas. The hobbyist and consumer market is a separate category, important mainly to a few firms focused on inexpensive systems and the smallest version of these aircraft, with aerial photography being an especially popular application. 
  • Overall, most drone industry growth is on the commercial side, as the shift away from the military market gains momentum. The market for commercial/civilian drones will grow at a compound annual growth rate (CAGR) of 19% between 2015 and 2020, compared with 5% growth on the military side. The average selling price of a commercial drone system, including software and hardware, is now ~$30,000, according to market research we have reviewed, but will come down gradually as new regulation opens up competition. 
  • E-commerce and package delivery will not be an early focus in the drone industry. Despite the hype around Amazon Prime Air and other high-profile research programs looking into delivery drones (DHL, etc.), this will not be a common application in the short- or medium-term. E-commerce deliveries would be focused in urban areas, where airspace is crowded and regulators will see too many hazards to approve routine drone activity. 
  • Proposed US regulation would effectively end the ban on commercial drone flights within the next two years and would allow low-altitude flights of small drones within view of a ground-based pilot. US government actions point consistently toward a near-term goal of deregulating small drones for specific and limited commercial applications, in strictly demarcated areas in which no members of the larger public would be exposed to drone overflights. 
    • The proposed rules dovetail with the handful of "exemptions" that have been granted over the past couple of years allowing specific US firms to fly drones commercially.
    • The rules, including privacy safeguards, are unlikely to be finalized before early 2017, but we believe it is very likely that widespread commercial unmanned aerial vehicle (UAV) flights will become routine sometime that year.
    • The proposed regulations ban drone flights over populated areas and prohibit flights that don't maintain the drone within a pilot's line of sight. That puts a chill on applications such as advertising or [...]