Consumer drone business stumbles, but commercial markets beckon

Tue Nov 15, 2016 9:01am EST
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(This Nov. 11 story was corrected to rewords paragraph 6 to make clear that retailers gave additional discounts on DJI drones)

By Heather Somerville

SAN FRANCISCO (Reuters) - The fledgling drone industry is in the throes of change as weak consumer demand and falling prices drive startups to shift their focus to specialized business applications.

3D Robotics - an early drone startup that raised more than$125 million from investors - has seen its consumer business all but crash. This week, it unveiled a new commercial strategy, announcing a camera-equipped drone with imaging software designed for construction companies.

GoPro Inc this week announced a recall of about 2,500 drones for a refund after just a couple of weeks on the market - some units had sudden power outages - and didn't say when it would offer a replacement product. Europe's Zano, which made mini-drones for consumers, shut down last year.

While many drone-makers overestimated demand from hobbyists, they now see big opportunities selling to businesses under newly relaxed U.S. regulations. Beyond flying robots, investors and entrepreneurs see especially strong prospects in software and services that can make aerial imaging useful for industries including insurance, construction, agriculture and entertainment.

Companies including Inc and Zipline, a drone startup, are also aggressively developing drones for delivery.

Most startups vying to sell consumer drones, often used for racing or photography, have been stung by China-based DJI. The company has dominated by slashing prices, and some retailers have offered even deeper discounts. Some stores' prices on DJI's popular Phantom 3 drone, for instance, have dropped to about $300 from about $1,000 at the beginning of the year.

3D Robotics took a beating after releasing its Solo consumer drone last year for about $1,500, said co-founder and CEO Chris Anderson.   Continued...

Drone company 3D Robotics displays its new commercial drone equipped with high-tech cameras and imaging software to a group of journalists at its headquarters in Berkeley, California, U.S., November 9, 2016. Picture taken November 9, 2016. To match Analysis USA-DRONES/CONSUMER     REUTERS/Heather Somerville