Technology GoPro struggles on slippery slope
Adventure camera pioneer sacking staff and dropping products after three years of mounting losses that have led CEO to cut his 2018 cash compensation to US$1
Few companies in the world are as synonymous with adventure as GoPro. It has built a reputation for being the camera every adventurer needs, whether they’re jumping out of a plane, surfing a wave or scaling a building,
But despite having one of the strongest brand names in the world, GoPro is in trouble and for three years has been losing hundreds of millions of dollars in revenue.
GoPro yesterday announced its preliminary fourth-quarter results for 2017, forecasting a sharp decline in revenue to US$340 million ($474m) — 40 per cent down on the same quarter in 2016.
The company is now undergoing massive changes, reportedly enlisting the help of JPMorgan to find a buyer while chief executive Nick Woodman slashes his 2018 cash compensation from US$800,000 to US$1.
Since listing on the stock market in 2014, GoPro has reported losses in 2015 and 2016 but said it was “committed to turning around” the business.
Here’s why it may be trickier than the company thinks.
‘The golden child isn’t so golden any more’
Experts put forward a number of reasons GoPro’s domination of the action-camera scene is weakening.
Technology commentator Trevor Long said it had a lot to do with the price.
“There’s obviously a lot of cheaper action cameras on the market now and even though GoPro pioneered the market, there are a lot more competitors now,” Long told news.com.au.
Responding to a weak demand for cameras in the holiday period of 2017, GoPro slashed the prices of its more recent cameras.
It cut $100 off the original selling price of its HERO5 Black and Session versions and also cut $100 off its HERO6 Black premium model.
In New Zealand, the HERO5 Black now retails for $499 and the HERO6 Black costs $660.
“As we noted in our November earnings call, at the start of the holiday quarter we saw soft demand for our HERO5 Black camera,” Woodman said.
“Despite significant marketing support, we found consumers were reluctant to purchase HERO5 Black at the same price it launched at one year earlier. Our December 10 holiday price reduction provided a sharp increase in sell-through.”
Globally, it led to the sales of the cameras doubling and tripling respectively but it was also part of a number of measures that will cost the company US$80m.
Long said GoPro, once dubbed “the golden child”, “isn’t so golden any more” and its inability to embrace innovative tech devices like 360-degree cameras and drones had been detrimental.
“They really missed the boat on drone technology and even though they did bring out their own version of a drone, it had to be recalled, which definitely wasn’t a good look.”
As part of its 2018 strategy to return to profit, GoPro announced it was exiting the drone market, killing its Karma version, released in 2016.
In New Zealand, Karma cost $1500 — without the camera.
Despite being the secondbest-selling drone in its price range last year, the company said a “hostile regulatory environment in Europe and the United States” led to its end.
Karma was also plagued with technical difficulties and recalls after numerous customers reported crashes.
Dropping Karma means more than a fifth of GoPro’s staff will lose their jobs. Last September 1254 people worked for the company. In 2018, there will be fewer than 1000 employees worldwide.
Long said the newest versions of the GoPro were much better than anything else the company has brought out, but their failure to innovate had cost them.
“Innovation was the thing that made GoPro what it was and stopping that has cost them audience and loyalty.”
Despite GoPro’s rough couple of years, the brand is still by far the strongest in the action-camera market — a ranking Long said was still worth a lot of money.
“A lot of big companies would pay top dollar even just for the brand name,” he said, admitting GoPro partnering with a company like Sony could lead to huge things.
And clearly, it’s a venture GoPro boss Woodman may be considering.
“If there are opportunities for us to unite with a bigger parent company to scale GoPro even bigger, that is something that we would look at,” he told CNBC.
QUT Associate Professor and retail expert Gary Mortimer attributed GoPro’s struggles to the rapid development of smartphones.
“Their first value proposition was a very small, portable and durable camera and originally that worked extremely well for them,” Mortimer said.
But unlike smartphones, GoPro’s value proposition didn’t evolve much past that — aside from increasing video quality.
Smartphones, on the other hand, became smaller and thinner, developed better cameras and became more durable.
Most smartphones now even have some level of water resistance — another example of the smartphone market mirroring GoPro’s most popular features.
Mortimer said one of GoPro’s biggest draws was being able to film yourself in the thick of the action, whether surfing a wave or skiing down a mountain.
“You and your camera never used to be able to be part of the activity together. It was always one or the other but now you can even put your phones underwater.”
Mortimer did, however, agree with GoPro’s decision to drop out of the drone market.
“In my experience, I’ve seen a lot of businesses fail because they grow simply for the sake of growth. Sometimes, that’s not the space you want to put yourself in where you’re exposing yourself to other businesses.”
Will GoPro earn back its adventure devotees?
Since its launch in 2004, diehard adventurers have sworn by the action-proof camera.
After billing itself as “one of the most exciting and aspirational companies of our time”, GoPro managed to raise US$490m before its entry into the stock market in 2014.
And, in the months after its debut, GoPro’s shares traded more than three times above its initial public offering price of US$24.
Some even argued it wasn’t technically just a camera company but a lifestyle brand similar to Facebook or Twitter, where people share their experiences with the brand socially.
Speaking to news.com.au last year, Woodman admitted he knew he wouldn’t be a billionaire without those loyal fans posting videos.
“Other companies can’t replicate the brand and our movement because we have millions of passionate customers sharing amazing videos shot on our products. There’s no advertising or social media campaign that can beat this type of exposure.” Woodman is also adamant all of the brand’s drastic changes, including killing Karma, cutting staff and dropping his salary, will return GoPro to profitability by the second half of the year.