Predictions for the small unmanned aircraft systems industry for 2015.

1. VTOL Small Unmanned Aircraft Systems (sUAS) Industry Predictions for 2015
Dave Litwiller
Vice President, Aeryon Labs Inc.
January 2015
first.last@aeryon.com
2014 was a great year at Aeryon Labs, and for the VTOL sUAS industry. Business has doubled from a
year ago, and the outlook is for further strengthening. As we look across 2015, the sUAS industry is well
situated to continue growing and evolving at a remarkable pace. That means it is time for a few
predictions for 2015 spanning the consumer, prosumer and professional market tiers:
• Hegemony in the Consumer Space. In the consumer and prosumer tiers of VTOL sUAS, the triopoly
of Parrot, DJI and XAircraft will further its collective lead. Together, these vendors hold well over
80% of the global consumer market, and virtually all of its profitability. The scale advantages that
these players have are compelling, for R&D, manufacturing, and access to distribution to service
consumers and prosumers. They will extend their sector lead in 2015. The outside player which is
best situated to ascend to this lead pack of consumer drone producers is GoPro, if they follow
through on their reported efforts to launch a product in this category in 2015.
• Nano UAVs as the Next Consumer Battleground. Efforts to outflank the early consumer space
leaders will lead to a number of smaller size and lower weight consumer VTOL UAVs from insurgents
and repositioning incumbents. This technology and product form factor change to palm-scale
devices will be driven by convergence of cameras and UAVs into a more integrated hybrid. Smaller
size and weight will increase safety, and provide added assurance to vendors and consumers alike
that these products can continue to be legally operated without licenses or certifications through
coming regulatory changes.
• Looming Consolidation. Also in the consumer and prosumer sector, first efforts at consolidation
among the second tier entrants will occur. As the cost, complexity and challenges of developing and
launching competitive products become ever higher when trying to unseat well positioned and high
performing incumbents, as well as the increasing importance of gaining access to distribution, one
or more roll-up efforts of secondary players should be expected in order to start to try to aggregate
sufficient scale to become competitive with the major incumbents.
• Safety First. There will be an increased emphasis on safety. Industry leaders will bring out
technologies which will further reduce the occurrence of flyaways, curtail other abnormal flight
terminations, and maintain more robust communications links between aircraft and operator.
While more ambitious safety technologies like far field sense & avoid will continue to garner
headlines, steady progress on more basic aspects of flight safety will differentiate the vendors which
will make the most impact in 2015.

2. • Precision Agriculture Price Pressure. Recognition will grow that wide adoption of sUAS in precision
agriculture is likely to be much more price sensitive than the early ecosystem for this market has
generally contemplated. The history of precision agriculture technologies over the past 20 years is
persuasive that mainstream usage will likely only take place once unit prices for fully integrated data
acquisition aircraft systems are down to just a few thousand dollars, with attendant reductions from
today’s levels in data processing subscription fees and other ancillary costs.
• Proprietary Outperforms Open Source. Proprietary technology platforms will continue to decisively
outperform open source models for the ability to optimize flight performance, reliability, safety and
rate of development progress in the service of end users. The parallels of the sUAS industry are
much stronger to the early days of the automobile industry, civil aviation and computing for the
advantage of proprietary technology than the most recent form of the application layer of
smartphones or the PC era where open source came to prominence.
• Increasing Specialization. New entrants will increasingly specialize. As market expectations for
sUAS performance and dependability continue to climb, it will become more and more cost
prohibitive for new entrants to try to take on the challenges of offering a whole system from the
outset. New technology entrants to the sUAS industry will tend to focus on particular subsystems or
use cases, and partner with other players to deliver complete user solutions.
• Vendor Resiliency as a Deciding Factor. Awareness will continue to increase among enterprise and
business users that the overall costs and benefits of sUAS ownership are many times greater than
what people pay initially for the sUAS and training. With a sUAS program investment significantly
beyond just the equipment acquisition and deployment, commercial users will take greater interest
in service, support, upgrade paths and issue resolution as deciding factors when selecting a sUAS
vendor.
• Diversify or Languish. The expensive waiting game will intensify for most professional sUAS vendors
which are exclusively pursuing the advent of commercial markets in the US. The ride will be rough
for businesses without the diversification of other geographical, application and regulatory markets
to help support near term operating costs through revenue and contribution margin. Early stage
sUAS vendors which are predominantly levered to the opening of US airspace for commercial sUAS
will have to be highly funded to weather the timing uncertainties. Customers will get a better
technology roadmap and more predictable delivery of new capabilities from vendors with diversified
revenue bases and sustainable business models.
• VTOL sUAS – The New Leader. The civilian market for VTOL sUAS has grown in a few short years to
become as large as the military market for larger UAS achieved over 15 years. The VTOL sUAS
market will approach $3 billion in 2015. The dynamism and pace of change in the civilian sUAS
space is exceptional. The civilian market will continue to expand at a very rapid pace, and will come

3. to increasingly define expectations for performance, capability and reliability. The days of the sUAS
space being a fast follower to the industry of larger unmanned systems is coming to an end. 2015
will be the year of ascendancy in which VTOL sUAS will come to be a driving force for many other
parts of the UAV industry.