It’s no secret that just about every segment of the drone market is quickly becoming saturated to the point that making a profit can be challenging. Nowhere is this more obvious than the graveyard of drone manufacturers where companies such as:
Lilly Robotics (came back…sort of), and
Torquing (Zano Drone)
have all fallen and ceased hardware operations citing increased competition and market challenges. Today we can add another name to that list; GoPro.
Last week, GoPro indicated that they would be cutting 200-300 jobs from their drone division. Today, they explained the cuts by announcing their departure from the consumer drone market entirely and now reports are coming in that they are putting themselves up for sale. Much has been said about GoPro’s somewhat public failure with its initial entry into the consumer drone market, the Karma. The question to ask now is, “What happens next and what does this failure mean for the consumers?”
The Karma drone was GoPro’s first (and only) entry into the consumer drone market. It was an interesting device that provided not only a drone but also a handheld gimbal for GoPro cameras. When it was released in October 2016, it received mixed reviews and faced stiff competition with DJI’s similarly sized Mavic Pro. In spite of the competition, it seemed as though the Karma would be able to capitalize on the GoPro enthusiasts who were familiar with the company’s products. However, a small issue with the battery caused some aircraft to lose power and forced GoPro to suspend sales and recall all 2,500 of the Karma units that had been sold. Pulling the Karma from shelves during the 2016 holiday season proved devastating for GoPro and their quarterly revenue landed almost $34million below projections. GoPro worked frantically to identify the issue and make appropriate changes to their manufacturing process. They were able to relaunch the Karma about 3 months later, but not before the Mavic Pro had gained a significant amount of momentum. Some believed that GoPro would regroup, learn from their earlier mistakes, and launch a second generation Karma but that appears less than likely. The company shared its less than stellar predictions for the market by suggesting regulatory conditions, “will likely reduce the total addressable market in the years ahead.” Couple that with, “margin challenges in an extremely competitive aerial market” and you have what GoPro defines as an “untenable” market.
What Does This Mean for the Consumer Drone Market?
Obviously, less competition is generally a bad thing for any industry and this is no exception. GoPro announced that the Karma was the second best selling brand in its price band (likely way behind DJI) so there is quite a vacuum created by their departure. Companies such a Parrot and Yuneec will likely attempt to fill that gap, but it seems unlikely that anyone can catch up with DJI or keep them from expanding their lead.
There is only one company that could possibly disrupt DJI’s plans on market domination. That company is DJI. As we covered in a previous article, despite their almost 75% market share, there are growing concerns over the company’s use of data collected from their drones. It is alleged that DJI provides the Chinese government with access to user flight data as well as limited flight imagery that is collected from the DJIGo mobile app used to fly their aircraft. Reports suggest these allegations have already prompted certain groups within the U.S. Government and military to restrict the use of DJI aircraft among their personnel. If these allegations are not addressed quickly, DJI could find themselves facing an uphill regulatory battle just as they strive to expand their presence in commercial applications such as agriculture and infrastructure.
While VC funding for robotics and drones seems to be increasing, the percentage of that funding allocated to hardware companies (drone manufacturers) is actually going down.
Those companies, like Zero Zero, who have already received funding will be likely competitors in the smaller ‘selfie drone’ market that the DJI Spark currently leads. It is also possible that a Kickstarter backed drone could enter the market, although companies like Zano and Lily have shown us that these types of hardware projects don’t always work out for consumers.
For now, companies such as Yuneec will continue to play catch up with DJI and hope for the best. My only hope is that DJI continues to innovate does not use its position in the market to slow innovation or inflate prices. If they rest on their laurels, we all lose.