“I was up jammin’ ’til 3 a.m. last night,” GoPro founder and CEO Nick Woodman says by way of apology, as he arrives half an hour late for a recent interview at the company’s headquarters in San Mateo, Calif. If the surfer-dude lingo isn’t enough of a giveaway that Woodman isn’t your typical CEO, there’s the motocross helmet and skateboard deck on display in his playfully decorated office.
What kept him up the night before were meetings with marketing and product teams, preparing for a couple of busy months ahead. GoPro is expected to officially unveil its next-generation consumer camera, dubbed the Hero 5, in the coming weeks. But despite the near-all-nighter, and with his breakfast untouched on his desk, Woodman exudes enthusiasm about the future of his company — a future that has been overshadowed by significant losses over the past three quarters.
To get GoPro back on solid ground, Woodman sees the company’s future encompassing more than cameras. He’s building a suite of software and services around GoPro’s core hardware, including what may be the chief exec’s most audacious move yet: an ambitious foray into the world of entertainment that he feels will help fulfill the brand’s potential.
“This holiday, we will have realized the full vision,” Woodman says. “GoPro 1.0 will finally be deployed.”
Of course, “1.0” is a funny way to describe the state of a company that has gone through more than a few upgrades since Woodman, 41, founded it in October 2002. An avid surfer and world traveler, he hadn’t wanted to choose between being the person behind the lens and the one actually riding the surfboard. As a result, he developed a compact camera that could be strapped to the body, the roof of a car, a bike, or anywhere else that was in the middle of the action. “Before GoPro, you had a world full of people pursuing their passions with no record of it,” Woodman says.
GoPro started selling its first cameras in 2004, and quickly became a hit with action-sports fans — snowboarders, surfers, divers, BMX bike riders, motorcyclists. It has catered to those users with an ever-evolving lineup of cameras and accessories, including straps that can mount GoPros to motorcycle helmets, backpacks, and even the family pet. What was once a scrappy startup has become a billion-dollar publicly listed company.
But the past year has brought considerable turbulence. Investors got spooked when the company’s sales cratered during the holiday season, with year-over-year revenue declining from $634 million to $436 million in the fourth quarter. Things looked even worse the following quarter, when the company lost a record $121 million during the three months ending March 31, compared with net earnings of $22 million the year before.
|READY FOR ACTION: GoPro’s line of small go-anywhere cameras includes one that can handle virtual reality. The company says sell-through data shows sales are up.
1. Omni VR camera: Synchronized 6-camera array with 8K capture; Price: $5,000
2. Session: GoPro’s smallest camera, it had a difficult launch; Price: $200
3. Hero 4 Silver: High-performance 4K model has built-in touch display; Price: $400
That’s brought a new strategic focus to GoPro, including the pursuit of a plan that has tantalized the company since its early days: turning GoPro into a media company. Near the end of this year, the world will get a first glimpse of what that will look like.
GoPro plans to launch 32 short-form shows late this year and early in 2017. Some of the titles in production include the travel show “Beyond Places,” the music format “Off the Record,” and the family-themed “This Is Gonna Be Fun” and “Kids Save the World.” GoPro also teamed up with Real Madrid for a series on the legendary soccer club, and there’s one about New York motorcycle cops in training.
The shows are being produced by the company’s entertainment unit, which, until earlier this year, was headed by former CBS Corp. executive Zander Lurie. But Lurie left in January to become CEO of SurveyMonkey, and the division is now being led by Ocean MacAdams, who at various points has held programming posts at MTV, Warner Music, and the Madison Square Garden Co. The unit, which numbers approximately 200 staffers strong, also includes Bill McCullough, who produced award-winning sports documentaries for HBO; and Joe Lynch, who led Time Inc.’s live-streaming initiatives.
Together, they’re looking to redefine how GoPro makes video, and turn content into a moneymaker. “We’ve really begun to evolve into multi-episode narrative storytelling as opposed to one-off events,” MacAdams says.
Lynch calls the change a new direction. “We went from a ton of amazing one-off viral videos to being a little bit more of a series-based production company,” he explains.
GoPro already has money coming in via branded content, including partnerships with Ford and Wimbledon. The company also launched a licensing portal for GoPro-shot content, selling action-sports clips to ad agencies in need of that perfect surfing scene. Licensed footage has been used by brands like Airbnb, Google, and Royal Caribbean. Another source of revenue is GoPro’s YouTube channel, which has more than 4 million subscribers, and has generated close to 1.25 billion video views.
|CRITICAL SNAPSHOT: GoPro has reported three consecutive quarterly losses in net income after plunging sales. The company is seeking new revenue streams.|
That’s all small potatoes when compared with the money GoPro makes from hardware sales. But MacAdams believes his entertainment division can change that split. “We think that we can be a significant part of the business,” he says. “We are well-positioned to dramatically grow the entertainment business in the relatively near-term.”
That’s an ambitious outlook, especially with a glut of companies rushing into video to chase ad dollars. So how does GoPro aim to compete in the sector? Executives are keeping their cards close to their chest, but GoPro’s content plans are tightly related to another key initiative for the company: its foray into the cloud.
When GoPro’s sales tanked during last year’s holiday season, Woodman was quick to offer an explanation. Recording videos with GoPro’s cameras is simple, he told investors, but editing and sharing the resulting footage is still much too complicated. The company has been taking steps to simplify the process in recent months, acquiring two mobile video-
editing apps called Quik and Splice for a combined $105 million.
Both apps are departures for the company because they not only work with GoPro-captured videos, but also with clips and photos that users record with their phones. “It starts to complete a broader-ecosystem story,” says GoPro president Tony Bates. “It’s not just hardware; it’s also software.”
The product is meant to introduce new consumers to the brand, getting some of them to eventually buy a GoPro camera. However, the company needs to provide more than just video-editing apps. “My content still doesn’t automatically offload from the camera to my smart phone, or to the cloud, so that I can easily access it on the phone,” acknowledges Woodman.
To change that, GoPro has been quietly building a set of cloud-based services over the past couple of years. The company has yet to reveal when and how exactly it will launch these services, but a source with knowledge of the initiative told Variety that a launch is planned for later this year.
Woodman muses that his company may enable its cameras to directly upload content to the cloud as via Wifi. This would make it easier to access videos from any internet-connected device, but also add the potential for a number of editing features. “GoPros could be aware of other GoPros,” Woodman says, painting a scenario where someone films a surfing trip with multiple cameras, only to have GoPro’s cloud services combine all of the recorded clips for easy multi-camera editing.
GoPro also quietly acquired San Francisco-based computer vision startup Lumific last year with the goal of adding more smarts to its services. Lumific developed apps that were able to find similar photos in a user’s camera roll, and help them find the best shots for sharing. Applied to video, similar features could further advance GoPro’s cloud services.
Asked about revenue opportunities from cloud services, Woodman is enthusiastic. “Is there an opportunity to provide a fee-based service, subscription service? For sure!”
But GoPro isn’t just looking to generate cloud revenue with subscription fees. It also aims to assemble a giant repository of sports and lifestyle videos through its cloud services. “Imagine when all of that content is managed in our cloud, and you’ve given us rights to license it and monetize it on your behalf,” says Woodman.
GoPro already has taken the first steps in that direction with its awards program, launched in October. As part of that initiative, the company invites users to submit photos and videos, paying them up to $5,000 for their footage.
However, until now, users had to submit content to GoPro to take part in the program. With its upcoming cloud services, the company could automatically tap into a huge pool of videos that could then be redistributed on GoPro’s own channels, or licensed to others. “We go from having access to a very small amount of content to having access to dramatically larger amounts of content,” explains Woodman. “That’s going to dramatically scale our licensing opportunities.”
GoPro also wants to use this content pool to identify the best filmmakers in its community, work with them directly on future productions, and, over time, build out a network of correspondents. “Those correspondents then become our stringers around the world,” says Lynch. He likens the effort to the way Vice has been working with freelancers to develop programming with a distinct look.
While becoming a kind of Vice of action sports, travel, and lifestyle — powered by a worldwide network of freelance correspondents — is no easy feat, making money with it may even be harder. Bates readily admits as much. “It takes many, many years to change a business model,” he says, cautioning against overly high expectations. “We as a company need to be realistic that monetizing content is a whole different approach. I think what we are building is the optionality to do it.”
|“We as a company need to be realistic that monetizing content is a whole different approach.”|
The question is whether GoPro’s investors have the patience for a multiyear bet on media and the cloud. That patience got tested severely last year by the bungled introduction of the Hero Session, the company’s smallest camera. GoPro had to delay the launch, and decided to go to market in July, at a time when people are frequently on vacation. What’s more, the new camera was priced close to the company’s top-line model, confusing consumers and reviewers alike. The launch was a disaster, and consumers weren’t buying the Session until GoPro cut the retail price in half.
“We introduced a product that competed with our own product,” admits Bates.
Earlier this year, GoPro also delayed the launch of its long-awaited drone, which is now scheduled to be released in time for the holiday season. All of this scared investors, sending the company’s stock sharply down, from a high of $63 a year ago to a low of $8.88 in May, before an August rebound that saw shares climb above $15 to a seven-month high. The company took some painful steps to turn things around, including laying off 7% of its staff and cutting several camera models from its lineup.
Bates maintains that quarterly revenue generated by selling cameras to retailers doesn’t reveal the whole picture. Sell-through data, which shows how many cameras consumers have actually bought, has been on the uptick, suggesting that stores are moving their inventory before GoPro introduces a new model. “From a business perspective, the company is in as good a shape as it possibly can be,” says Bates. “Inventory has never been lower.”
GoPro promises investors a return to profitability by the end of the year, but not everyone is buying the positive outlook. “GoPro’s long-term picture is not so rosy,” says Jackdaw Research analyst Jan Dawson (a contributor to Variety). He argues that GoPro’s target audience will always be limited. Most consumers will simply be content with using their phone to record video, and have no need for an extra camera, he maintains. Dawson also doesn’t believe that new products like GoPro’s recently released $5,000 virtual-reality camera, or its upcoming drone, offer much growth opportunity. “Those are much smaller markets,” he says.
Dawson feels that GoPro’s growth has come to an end, and that it may be time to sell — perhaps to a major camera brand looking to finally cash in on action cameras. “Ultimately, the best future may be as part of a bigger company,” he says. “It’s hard to see a way forward for GoPro as a stand-alone company.”
Unsurprisingly, Bates disagrees. “I look at it as a much longer journey,” he says, recalling his days as a senior VP at Cisco — a company that at one point was as small as GoPro, only to grow to 65,000 employees.
The next half-year should determine whether Dawson, or Bates and Woodman are right. If the the folks at GoPro can get people excited about their new hardware, and augment the devices with compelling services, then the company does have a chance to get its mojo back. If those efforts fail, GoPro could easily become a takeover target, and we might never see its entertainment plans go beyond that first slate of shows this coming winter.