Gear Shed

How High Can GoPro Go?

After its hugely successful IPO Thursday, there's no doubt that GoPro is on fire right now. But the company faces some big challenges—including whether it can make money as a media company—that it needs to figure out in a hurry.

GoPro made its public debut Thursday on the NASDAQ trading floor, where its share prices jumped 31 percent.     Photo: Courtesy of GoPro

By this point, GoPro cameras have been used to film just about every activity on the planet, from BASE jumps to baby’s first steps to surgical operations. Amateurs affix to them to dogs and kites, professionals use them to shoot Discovery Channel shows and feature films. But the company found itself in unfamiliar territory earlier this week: the stock market.

This past Thursday, GoPro’s initial public offering brought the company into the world of public trading. It’s the first consumer electronics company to go public since headphone maker Skull Candy debuted in 2011, and early signs look promising for GoPro. Its shares rose 31 percent by the time the floor closed Thursday, giving it a market value of 3.9 billion, nearly equal to that of Domino's Pizza Inc., according to the Wall Street Journal

By just about every measure, the company is on fire right now: revenue increased last year by 87 percent to nearly $1 billion, it sold 3.8 million cameras last year, and GoPro customers uploaded nearly three years worth of video in 2013 alone. But founder and CEO Nick Woodman’s brainchild has run into some recent debt, and revenue dropped 7 percent in early 2014. A source with knowledge of the situation said that the IPO was not a result of that debt, but that it’s simply a natural progression of GoPro’s evolution.

As hot as GoPro is right now, its IPO comes at a pivotal time for the camera maker. One of the big questions on the table, which the company acknowledged in its IPO filings, is that it currently makes nearly of all of its money selling cameras (that cost upwards of $400). This is a serious issue.

For many of us, a GoPro is not unlike a fancy new juicer. We buy one because it’s new and cool. We’re excited to use it at first, but then we realize that it’s easier to just buy juice. Or watch someone else’s awesome video. That’s because creating a fun little video that your buddies might want to actually watch is not easy: you need to do something cool, film it from multiple angles, and then edit it creatively. There’s lots of boring POV footage on people’s hard drives; there are lots of GoPros sitting in people’s gear bins, no longer being strapped to chests or mounted atop helmets on a regular basis.

One big example stands out as a cautionary tale. Remember Flip Video cameras? If so, you probably haven’t seen the company around lately. Cisco Systems bought Pure Digital, maker of the Flip cam, for $600 million worth of stocks in 2009, and yet the ascendance of the smartphone camera rendered the product obsolete. Cisco shut the Flip operation down in 2011.

Despite what some financial analysts might be predicting, GoPro is a long way from becoming obsolete. While it’s true that every few months a new competitor enters the action-cam scene, often selling a similar product for less money, no one has yet to make a comparable—let alone better—camera. We know this because we’ve tested nearly all of the rival cameras. New technologies, like wearable cameras that capture 360-degrees of footage, will eventually erode some of GoPro’s market share, as will smartphones, whose video capabilities are only getting better, but not any time soon.

GoPro is acutely aware of the challenges it faces. It just recently debuted new software that makes it easier than ever to edit your own movie. Newer, fancier, smaller, more user-friendly cameras are in the works. And they’re rapidly trying to transform themselves from a camera company into a media empire, à la Red Bull. Woodman told Bloomberg on Thursday that GoPro’s “focus is to help customers capture, manage, share quality content.” The product he’s trying to sell is not just the technology itself, but the experience of reliving last week’s bungee jump through video. 

Not everyone bungee jumps, though. And while they’ve done an exceptional job at marketing themselves at active people doing rad things, they need to do a much better job marketing its camera to the rest of us. This will require new and different branding and marketing campaigns.

The biggest question, however, is whether or not they can figure out how to make money as a media company. GoPro recently struck a deal with Microsoft to be a channel on the new Xbox, and has begun to monetize its content on its YouTube and Virgin America channels, but these are relatively small drops in the bucket. To make significant amounts of money, GoPro will need to negotiate deals with bigger and bigger content distributers as well as forge new licensing partnerships.

And GoPro will need to do so pretty quickly. The reason Red Bull has been able to sign up hundreds of athletes and musicians, sponsor major events and stunts, and become a massive media and marketing empire is that many people drink several cans of their stuff every day. GoPro doesn’t have that luxury. As its camera sales inevitably decrease, it needs to figure out how to distribute and make money off its own content, be it user-generated or of its own creation.

“Over time, if you think of all the resources that Apple or Google can bring to bear, not this year but next year, GoPro could have some problems,” said Paul Meeks, a tech industry financial analyst with Saturna Capital. “It’s the same kind of scenario for GoPro. They have to become a bigger ecosystem than the product." 

Which is exactly what it’s trying to do. The IPO is getting all the mainstream media attention, but behind the scenes GoPro is reportedly signing up musicians, producers, and content creators of every stripe. It also recently beefed up its roster of athletes. In short, it’s ramping up big time. So while you may not use your GoPro as often as you thought you might, don’t write the company off yet. 

If it can pull it off, it will be a clever trick.

More at Outside

Comments