Film or Farm: Which is the Bigger Drone Market?

Film or Farm: Which is the Bigger Drone Market? – Part 1
 
This is Part 1 in a two-part series that summarizes my views on why video/film/cinema – not agriculture and farming — will be the largest driver of sUAS commercial businesses. In this part I explore thoughts on the market for video/film/cinema, and below I outline why I believe film and video will lead in market uptake. In Part 2 I’ll outline why I believe agriculture will lag in market uptake.
 
A total economic impact of $13.6 billion and 70,000 new jobs in the first three years. That’s the forecast for what drones will bring to the U.S. once regulations are in place, according to a March 2013 market study produced by the Association of Unmanned Vehicle Systems International (AUVSI). The report entitled “The Economic Impact of Unmanned Aircraft Systems Integration in the United States,” goes on to say that precision agriculture and public safety will make up more than 90% of this growth. Most important, the report confidently states, “…the commercial agriculture market is by far the largest segment, dwarfing all others.”
 
These figures get repeated over and over again in the media and across the blogosphere.  Existing players and potential new entrants in the UAV market are betting their business futures – and in some cases their entire family’s income and savings – on them.  Everybody wants in on the action.  But are the media, blogosphere, and AUVSI reports correct? I have some serious doubt. Here’s why:  The numbers from my recent study on the impact of Federal Aviation Administration (FAA) rules on the small UAS business say aerial photography and cinema – not agriculture –dominate the other vertical markets and will continue to do so for some time. This two-part post looks at those two industries – film making and agriculture – and attempts to separate market forecast hype from the reality by looking at detailed numbers, market forces, and the specific applications themselves.
 
“Survey says…”
 
Validated respondents to my survey represent principals and employees at sUAS companies whose annual revenues span from US$100,000 to more than US$10 million. Every significant market vertical is represented. Survey participants were required to identify their primary commercial service offering. The results appear in the table below.
 
Primary Service or Product Response Percent
Aerial Photography / Video & Cinematography / Movie /TV 41%
Sales of sUAS aircraft and/or technology 11%
Agriculture / Farming Services 8%
Mapping / Topography / Geospacial / Photogrammetry 5%
Education and Training 5%
Consulting 4%
Data Aggregation or Analytic Services 3%
First Responder Service (Police, Fire, or Medical) 3%
Utilities 2%
Scientific Research 2%
Construction 2%
All Others 13%
 
Clearly, the dominant service offering is aerial photography / video / cinematography / movie/ TV (41%). Only eight percent of participants identified themselves as offering or wanting to offer agriculture / farming services.
 
When viewed through the lens of each service provider type, this data offers some interesting insights. For example, the largest group of service providers, aerial photography and cinematography, have current revenues that spread across the whole range (from zero to over $1 million). In fact, several reported revenue over $10 million, a figure no other group – including agriculture – reported. Clearly current UAS market activity runs contrary to the AUVSI forecast.
 
Money talks
 
Drone regulation was among many issues the Motion Picture Association of America (MPAA) lobbied on in 2012 and 2013, at a total cost of $4.11 million.  According to this report, the MPAA has been constantly appealing to the FAA to let them use smaller drones for film-making purposes. If you follow the market dynamics and technical advancements of the TV and film industry, the push by the MPAA for sUAS makes sense. High-end digital cameras and computer-generated imagery (CGI) effects have drastically reduced film-making costs, and have been delivering scenes that weren’t possible before. Even so, the industry is striving for more technological enhancements every day because audiences expect to see something new and spectacular in each new film. The longstanding arms race in Hollywood among studios vying to deliver the most eye-popping shots and special effects continues unabated.
 
Drone cinematography is now the new kid on the Hollywood block. A drone costing just a few thousand dollars can deliver high wow-factor shots that were impossible to get before, or could only be captured using expensive cranes, stabilizing equipment, and a manned helicopter. The average TV or movie audience member generally doesn’t realize how much of a production is actually shot by a drone, but the astute viewer can already see drone footage being used everywhere in popular TV shows and movies (sorry FAA).  A growing share of Hollywood blockbusters and TV programming involve UAS footage – Oblivion, Man Of Steel, The Hunger Games, The Dark Knight Rises – to name a few. Perhaps the most famous is this scene from the James Bond movie Skyfall:
 
Drone cinematography is still in its embryonic stage. Multirotor drones that hold cinematography-grade cameras have only a range of up to a mile, and their battery only lasts about 10 to 15 minutes. Still, they give filmmakers a definitive edge over traditional methods. Drones allow directors to pull off mind-boggling, acrobatic camera stunts that would otherwise have been possible only through CGI or maybe not at all. This incredible sense of power and cost savings are the reasons many filmmakers continue to lobby for the commercial use of drones and one of the reason why my research finds this market the largest.  Case in point. The FAA just announced on June 2nd that seven aerial photo and video production companies (not any farming or precision agriculture companies) have requested regulatory exemptions under Section 333 of the FAA Modernization and Reform Act of 2012, which would approve commercial drone operations for TV and motion picture work. This is the first industry to do so on such a scale.  While beyond the scope of this post, the photojournalism industry is another major force lobbying for drone usage, based on similar logic; getting the shot that keeps the audience riveted to the screen while ridding themselves of the enormous cost of operating manned helicopters.
 
Photography & Video – Film’s nearest cousins
 
When you look at the ‘film’ market for drones, there is no clear way to delineate film from video from photography.  Aerial photography and video platforms are mostly the same and vary mainly in size, camera-carrying capacity, and technical capabilities that result in each platform being best suited for a certain grade of user (ranging from hobbyist to professional videographer). As I have written in The Democratization of Aerial Photography, technical and financial barriers to entry into the aerial photography, video and film services market are low, so it makes sense there are more players now and there will be more in the future. If a lightweight US$400 GoPro camera can shoot cinematography grade 4K video, and you only need US$1200 to get it up in the air with a small drone, and you can charge a US$1000-$2000 day rate for its use, and audiences are enamored of the resulting images, then it’s no wonder this market is exploding. Besides film and TV, here are some other aerial photography and video-related applications:
 
REAL ESTATE – showcase homes, marquee properties, commercial buildings, and structures
LEGAL – support forensic investigations, insurance claims, and property assessments
CONSTRUCTION – progress reporting for commercial, residential, and civil engineering
LAND – landscape architecture, land development, and research
SPORTS – player and team position analysis
That’s my argument for why I believe aerial cinematography / videography / photography will dominate the early sUAS business market.  To put a bow around it all:
 
Studios and audience are enamored of the footage / images that can be captured by drones, so there is clear demand for the final product that drones can create.
The financial and technical barriers to entry are low for many applications, making it easy for businesses to begin offering sUAS-based film and photography services.
Where the technical and financial barriers are higher (for example, studio quality film production) a technically astute and well capitalized film production industry is eager to get their hands on new technology like drones.
A lot of filming occurs in a tightly controlled environment on private property, where safety can be ensured and where a compelling case can be made for regulatory exemptions.
Film or Farm: Which is the Bigger Drone Market? – Part 2
 
This is Part 2 in a two-part series that summarizes my views on why video/film/cinema – not agriculture and farming — will be the largest driver of sUAS commercial businesses. In Part 1, I explore thoughts on the market for video/film/cinema, and below I outline why I believe agriculture will lag in market uptake.
 
The March 2013 market study produced by the Association of Unmanned Vehicle Systems International (AUVSI) titled “The Economic Impact of Unmanned Aircraft Systems Integration in the United States,” says precision agriculture and public safety will make up more than 90% of the market growth for unmanned aerial systems. The report confidently states, “…the commercial agriculture market is by far the largest segment, dwarfing all others.”
 
I don’t buy it, and here’s why:
 
Let’s start with the AUVSI forecast.  Read what one commenter said in my last post:
 
“There is a basic problem with the AUVSI study methodology – it took the total arable land area of Japan and divided it by the number of registered UAS performing agricultural roles in that country to provide a demand factor. It then divided the total amount of arable land in the United States by that same demand factor and used this to forecast its prospective future demand for the agricultural sector as a whole. The problem is, the Japanese agricultural land areas do not correlate in size, capacity, or type of agriculture as performed in the United States. In fact the Japanese usage is largely restricted to spraying of rice paddies on small allotments as a replacement for labor which has shifted to the cities. The only possible comparison that the Japanese land area to UAS numbers ratio that could have potential validity is to compare the Japanese ratio with the total amount of land used in rice cultivation in the United States. That is a very different equation than that used by the AUVSI study and can be predicted to give a very different set of economic figures as a result. AUVSI has used very bad modelling to build its argument on, and its figures should be used very, very, very cautiously.”
He’s right.  So how do we get a proper forecast?  That will take some time to work out and look for material from me on that later. For now let’s look how modern agriculture has historically adopted and used technology, because the devil’s in the detail.
 
The farmer and the satellite
 
With the launch of the Landsat 1 satellite in 1972, NASA funded a number of investigations, including one that  examined the spring vegetation green-up and subsequent summer and fall dry-down throughout the Great Plains region of the Central U.S. The researchers for this study found a way to quantify the biophysical characteristics of vegetation from the satellite images.  They were able to calculate the ratio of the difference between the red and infrared radiation being reflected back by plants on the ground as a means to determine the vigor of plant life. This led to a metric known as the Normalized Difference Vegetation Index, or NDVI.
 
NDVI attempts to simply and quickly identify vegetated areas and their condition, and it remains the most well-known and used index to detect the health of live green plants today.  Since early satellites acquired data in visible and near-infrared, it was natural to sell it packed up in maps to farmers.
 
NDVI allows agronomists and producers to identify problem areas and make timely decisions. Scouting maps can be requested at key dates as guidance for field visits. NDVI-based scout maps show variations in the field, so users know where to look in the field to determine where corrective or preventative measures are needed. Users can plan their field visit locations, take it to their GPS or a printable pdf report, and accurately evaluate the reasons for in-field variability.
 
Monitoring fields
 
NDVI maps are also used for monitoring fields, detecting anomalies, and for estimating crop yields. A strong correlation has been demonstrated between yields and NDVI at certain crop growth stages, as described in this research.  Besides satellite-generated images, farmers also have access to more resolute imagery taken from manned aircraft.  They can subscribe to a service like Terravion and GeoVantage to get NDVI maps every week if they like. The greater the frequency, the lower the cost per acre.
 
Here’s the rub: use of aerial imagery all sounds great until you start to look at the numbers. According to this report, only 21% of service providers (referred to as dealers in the report) who offer aerial imagery say it’s profitable, and it remains less profitable than other precision application services.
 
To spray or not to spray?
 
Here’s more interesting detail from examining how farmers are using technology today. Farmers know that plant growth regulators, insecticides, herbicides, fungicides, and mid-season fertilizers applied to selective locations can be effectively used to maximize farm output. Since NDVI maps from satellites or manned aircraft show variation of biomass within a field, farmers can divide those differences into management zones and address crop issues with variable rate spray applications (i.e. use more of this nutrient here, less of that pesticide there).  The idea is to minimize costs while increasing yields by using as little as possible of expensive inputs, applying them precisely where and when they are needed.
 
But here’s some breaking news. The vast majority of farmers do not use variable rate prescriptions, and the trend is currently in the wrong direction. This well-regarded survey says variable rate pesticide application usage decreased from 22% of all farmers in 2011 to 16% in 2013. And it seems there is low adoption of aerial imaging when it comes to providing guidance for targeted nitrogen application as well. Nitrogen fertilizers, which are expensive, are one way farmers are able to achieve the high yields we see today with modern agriculture. But a recent poll of Iowa farmers’ nitrogen management practices show only 25% of corn and soy farmers use aerial imagery to reduce nitrogen application.
 
The key takeaway is this: farmers already have data-driven tools available to them to make better crop management decisions, and the vast majority are not using them.
 
The farmer and the drone
 
Today, farmers have access to low-cost drones with cameras and image sensors on board.  These can be purchased for a few thousand dollars and flown by the farmer himself, or if they are lucky – and regulations aside – a local service provider.  Basically, the drones can produce the same NDVI images and maps that specialized satellite or manned aircraft image specialist do – only now with much higher resolution images.
 
You would think farmers would be thrilled with the combination of higher resolution images and more precise GPS coordinates, since it lets them identify problem areas within a few feet of accuracy.  In some cases, that is true, and others it is not. A higher resolution means you see more detail – detail that actually may detract from the usefulness of the image, like when it shows a shadow.  Is that a shadow or a bad crop area?  Hard to tell from the picture.  For that, you need to see it with your own eyes, as is done with crop scouting.
 
Crop scouting – the act of inspecting crops to look for problems such as pests, weeds, irrigation issues, and so forth — is generally done today via a simple drive-by in a pickup or an ATV.  Scouting is not a perfect science, and neither farmer nor service provider can assess every plant’s health and crop pressures. However, small drones are portable, and users can fly them over a field and see real-time images on a monitor. Since many farmers go out and scout their crops every couple of weeks manually, a drone crisscrossing the air could perform that work much more effectively. This helps cut down on the time identifying areas that need detail scouting and helps give the proper inputs on where to eventually spray weed control or pesticide, or even determine when it is time to harvest.
 
Beyond clarity of regulations, what’s missing for widespread adoption?
 
With the total value of our nation’s crop estimated at $140 billion per year, even a modest improvement in yield would have a substantial aggregate economic impact. However, it’s not yet clear how a UAS can deliver more usable data to a farmer or provides a cost benefit over the existing image solutions available to them today.
 
What seems to be missing from today’s solution is the expertise to interpret the data, correlate it with what is actually happening on the ground, and recommend a course of action.  Services that deliver aerial imaging can provide the data, but someone needs to invest the time, money, skills and software to get actionable insight from it. Right now, it appears that’s not being done well by the dealers who already offer imaging from satellites and manned aircraft. How’s that going to change when they start offering imagery from drones?
 
Here are few more questions:
 
What’s the incentive for a farmer to adopt a new imaging technology when 75% of farmers (at least in Iowa) don’t use what’s available to them now and dealers countrywide say it’s not profitable?
How will drones change that equation?  Why will farmers or crop consultants invest the money, time and expertise analyzing UAS-derived datasets if they aren’t doing the same with the manned aircraft or satellite derived data they can already purchase?
How will UAS service providers convince farmers that their data is more valuable, more actionable, and has a high ROI when so many farmers seem to be relatively uninterested in data in the first place?
Are farmers prepared to adjust their field operations and personnel to be data driven, and how will they make this happen?
I’m not saying that farmers won’t use UASs to improve their operations.  Some absolutely will, and in fact, some already are.  But given all of the underlying complexity, it does beg the question: Is agriculture really the biggest UAV market, “dwarfing all others” as AUVSI asserts?
 
My answer: I don’t think so.  To date, I’ve seen no research that really digs into the critical questions underlying the use of UAS in agriculture and shows the rationale supporting massive, rapid adoption; this despite the massive bets – in terms of time and capital investment – that are already being placed.  With so much at stake, I’m thinking that should be the subject of a considerable research study, one that I am currently formulating.  Stay tuned for details. Until then, my bet is that film – not agriculture — is the biggest sUAS market.
 
What do you think? I’m interested in your comments, reactions, and responses.
 

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