How Low Will Drone Prices Go?

After major drone manufacturer DJI raised $75 million from Silicon Valley venture capital firm Accel last month, the handwriting on the wall (or in the sky) is clear: Drones may be to the 2010s what PCs were to the 1990s.

With predictions that the commercial drone industry will far outpace the growth of the military sector, while generating an expected $2.3 billion in U.S. investment in 2016, the next question facing the market is not necessarily “How high?” but “How low?” How low can we expect drone prices to go as the market expands beyond hobbyist and commercial users and into the mass consumer market?

Of course if we at DRONELIFE had the answer to that question, we would already have our very own CNBC Morning Show and no doubt be vacationing with Warren Buffett and Richard Branson on our solid-gold island (with our personal bartender drone always deployed). And while we can’t predict price projections in the drone world with any precision, we can examine a similar market and see what parallels may exist.

Time Machine: The year was 1985. Reagan was president. Hair bands were gods. Nintendo was still a few years away and E.T. the Video Game had successfully buried Atari’s Console King status like so many cracked cartridges in a desert landfill. For 14-year-old, mullet-wearing brats like me, all hope seemed lost on the home video game front. Imagine my delight when my father one day brought home a Tandy 1000 Personal PC. Fueled by Microsoft DOS, the Tandy sported a 5.25-inch floppy-disk drive, no hard-drive, dot-matrix printer and two software titles to engage my gamer’s high: King’s Quest and One on One: Dr. J vs. Larry Bird. The only other function the Tandy served was to run spreadsheets for my dad (anyone remember Lotus 123?). Total cost with a whopping 384K memory upgrade? About $2,500.

Fast forward to a Best Buy in Anytown, USA in 2014 where I bought an HP Laptop for our high-school age daughter for around $400 – Windows 8, touch-screen, fully loaded with both useful and space-wasting software. From a computing power standpoint, comparing the Tandy and the HP would be like comparing a Hot Wheels car driven by a cockroach with the Starship Enterprise.

With that analogy in mind, it’s a pretty safe bet to predict that models like the DJI Phantom series or the Parrot AR will see some dramatic price drops in the coming years. According to the Bureau of Labor Statistics, the price of computers dropped over 20 percent every year from 1999 to 2003. Over the past three years, prices have dropped for PCs 11-12 percent annually.

While the comparison between the drone and PC markets may not be perfect, there are parallels. Both sectors started with a handful of companies producing the product (IBM and Apple vs. DJI and 3DR, for example) only to be followed by expansion of competitors over time (compare the entry of Dell into the PC market with the recent entry of GoPro into the drone sector).

Like the PC market, drone ownership began as a hobbyist and commercial sector and is now coming into its own as a true mass market demand item. In fact, Sam’s Club recently reported that drones are expected to be a popular holiday gift buy and the retailing giant plans to stock about a dozen models.

If drones follow the PC pricing-decrease model, we can expect – for example – to see the DJI Phantom 3 Advanced to move from its current price point of $999 to $879 by next year and down to $525 by 2020.

Of course, several factors will change the drone pricing game in ways that cannot be predicted. In 2011, after seeing steady price drops for both PCs and peripherals, the hard drive market saw a surge in price after flooding at key production facilities in Thailand shut down the lion’s share of manufacturing for several months.

Natural disasters or other unforeseen “black swan” events could in the same way ratchet drone prices higher should a key manufacturing channel (say LiPo batteries) become compromised. Other factors that may mitigate lower prices could be the addition of more sensors or other functionality that could keep drone prices stable. In any event, it’s clear that beginner-level, consumer-market drones will eventually drop into the very low three-figure range (if not below $100) by Christmas – not to mention the fact that the drones of 2020 will likely no more resemble the models of today than my daughter’s tiny laptop resembles that Tandy behemoth that consumed so much of my childhood (time expended to defeat King’s Quest? One summer – totally worth it).