A shift is taking place within the drone industry as weak consumer demand and falling pricing shift the market from manufacturing to service offerings for specialized business applications, according to a new report from Fortune.
Much of the shift has been a reaction to Chinese drone manufacture DJI cutting prices by as much as 70% on certain unmanned aircraft systems models as they continue to dominate the marketplace.
The chill is being felt widely. Venture capital financing for drone companies fell 59% in the third quarter, to $55 million from $134 million in the previous year, according to data research firm CB Insights. The drop reflects a widespread funding slump across the tech sector but also heightened caution about drone companies.
Any new company trying to compete with DJI on consumer drones would have “an extraordinarily difficult argument to make” to venture capitalists, said Rory O’Driscoll, a partner at Scale Venture Partners.
Nevertheless, demand for drone services exists, and expected to continue to grow. In a May 2016 report, PwC projected the value of the global commercial drone services industry at $127.5 billion by 2020.