Drone Wars Shoot Down Profits: DJI’s new Spark drone will further its competitive lead against rivals struggling to turn a profit

DJI’s director of strategic partnerships, Michael Perry, demonstrates the new Spark mini drone on Wednesday at Grand Central Terminal in New York.

The Wall Street Journal 
By Dan Gallagher
May 24, 2017 3:22 p.m. ET


Consumer drone sales are taking off, but profits for most in the business have been grounded.

The market for what are essentially flying cameras is growing fast. Gartner estimates that consumer drones generated about $1.7 billion in global sales last year—up 55% from the year before. According to NPD, drone sales in the U.S. more than doubled year over year for the 12-month period ended April.

But most of that market is in the hands of one company—DJI. And the company’s competitive position looks likely to grow with Wednesday’s unveiling of the Spark, the smallest drone DJI has ever produced—and its cheapest out of the gate. Starting at $499, the Spark can take off and land on its user’s hand, and can be controlled either by gestures or smartphone. The drone starts shipping to buyers next month.

That will be good news to DJI’s venture investors who have poured more than half a billion dollars into the Shenzhen, China-based company to date. Now valued at $10 billion, DJI is now the 13th most valuable venture-backed company tracked by The Wall Street Journal. The company controls more than two-thirds of the consumer drone market, according to most estimates.

But DJI’s dominance has come at the expense of industry profits. Yuneec, backed with $60 million from Intel Corp.’s venture capital arm, announced in March it was laying off an unspecified number of workers. The company is the fourth-largest seller of drones in the U.S., according to NPD, but it still cited the need to make profits. Its CEO at the time told MarketWatch that DJI was “crowding the market” with price cuts. Another drone maker called 3D Robotics was reportedly trying to raise new funding in March at a valuation 82% below what it commanded just two years before.

And then there is GoPro, whose first drone called the Karma stalled on the launchpad late last year due to technical problems. Those problems got fixed, and the company says the drone has been selling well over the past two months. But GoPro also admits its drone profits are thin; CEO Nick Woodman said Karma was a “problem child” to the company’s overall margin at an investment conference on Tuesday.

Gartner projects the consumer drone market will top $3 billion in sales by next year and hit $4.6 billion by 2020. Now if only profits can soar too. 😁

Original article can be found here:  https://www.wsj.com