Does the world really need another Hero?

That question is on top of investors’ minds after action cam maker GoPro released lackluster earnings Wednesday. The company’s Q4 2015 revenue was down 31 percent year-over-year, in part due to a forced price reduction for its recently introduced Hero 4 Session camera, but also due to much lower-than-expected sales.

GoPro’s answer to all of this can largely be described as staying the course, and sticking to its Hero-themed camera lineup: CEO Nick Woodman downplayed competitive trends during the company’s earnings call, and said that the company would instead focus on simplifying its product portfolio as well as its software.

He also promised new product categories, and tried to strike an optimistic tone. Sure, the quarter was bad, he argued, but it was still the second-highest quarter in the company’s history. And full-year revenue was still up. “We are doubling down,” Woodman promised.

To which one analyst replied: “Nick, what if you’re wrong?”

The rise and fall of Flip

It’s a good question, and one that needs to be asked, especially because of some striking historic precedence. The rise of GoPro largely mirrors the early success of Flip, a handheld digital camcorder manufactured by Pure Digital. A decade ago, Flip cameras successfully captured a need for portable, high-quality video recording for the masses, selling two million units between 2007 and early 2009.

The secret to Flip’s success was its simplicity. Traditional camcorders overburdened consumers with features, but the Flip only had three buttons. Good design and heavy advertising also helped Pure Digital’s cause. Eager to capture a piece of the growing consumer device market, IT giant Cisco swooped in to acquire Flip for a whopping $590 million in march of 2009.

At that point, Flip looked like an incredible success story. A number of existing camcorder makers tried to copy the strategy of the company by releasing their own handheld cameras, but none was able to capture the mind- and market share of the Flip.

Just a year later, Apple released the iPhone 4, capable of recording 720p HD video — and it was immediately obvious that Flip was in trouble. Sure, videos recorded with the handheld camera looked objectively better than iPhone videos, but not by much. And faced with the choice between quality and convenience, consumers chose the latter, opting for mobile phone video recording instead of putting yet another device in their pocket. By 2011, Cisco announced that it would shut down Flip completely.

Competition from bigger, better phones

At the surface, there are some glaring similarities between Flip and GoPro. Woodman detailed during this week’s earnings call that the camera maker has been able to capture 85 percent of the U.S. action camera market. Market share elsewhere is growing as well, he said, arguing that competition is not the problem.

Except, of course, for the fact that GoPro revenue is down 31 percent. If the company is growing market share while sales are declining, then one can only conclude that the overall market is shrinking, perhaps due to competition from other product categories. Like, once again, phones.

Video recording quality on smart phones keeps improving, and many flagship models now support 4K video capture. Add larger, brighter and better-looking screens, and you got yourself a device than can record, edit, watch and share videos, all without the need to ever turn on the PC.

GoPros can’t offer that level of convenience. Users still need to offload their video, and edit it on other devices. Maybe their PC, or increasingly the phone itself. In other words: GoPro needs the phone, but phones don’t need GroPros.

What comes after the action cam?

Granted, there are things a GoPro is much better suited for than a phone. No one would strap their phone to the top of their motorcycle helmet, and few snowboarders would risk to take their new iPhone onto the slope. But as GoPro executives are looking to grow sales, they are starting to realize that the extreme sports and action market is a finite one. The number of people who don’t free climb, surf or skateboard is much bigger than that of those who do.

The company is now responding to this by trying to broaden its image. During Wednesday’s earnings call, Woodman explained that he does’t want to limit GoPro to the action cam label. “We would prefer to think of it more as… the world’s leading activity capture company,” he said.

With that, GoPro may also tweak its marketing. While the company has largely relied on action cam footage and sports-themed marketing in the past, it is now looking to more directly explain what its cameras can do. And finally, it wants to improve its software to make it easier for consumers to download, edit and share videos.

Those are all right steps. But in the end, GoPro needs to prove that it can evolve if it doesn’t want to end like Flip. It needs to recognize when existing product categories are commoditized, and embrace new ones that make consumers want to once again open their pocket books.

GoPro is starting to so with the release of a drone this year, but there are already a number of other companies offering aerial capture products. Add new FAA regulations that require drone operators to register with the federal government and avoid many public places altogether to the mix, and you get a sense that this will remain a niche product for the foreseeable future.

GoPro’s second bet on the future is virtual reality, and the company may have a lot more success with this product category in the long run. The company developing a 16-camera VR recording product called the Odyssey in collaboration with Google, but with a $15,000 price tag, it’s again something that not many people will buy.

But GoPro is also getting ready to ship its own six-camera VR recorder. And while that product will initially be pricey as well, one could expect prices for 360-video recorders to come down to the point where consumers will actually be able to not just watch, but also film VR content.

Combine that with live streaming and telepresence, and you got yourself a future product that people can place in the middle of a room to give grandparents hundreds of miles away an easy way to feel present during a kid’s birthday party – which is to say: The potential market could actually be much bigger than that of action cams.

Is GoPro running out of time?

Getting there will take time, especially as consumer VR headsets are just starting to reach the market. In the mean time, GoPro is making significant investments in original content. Executives have long said they eventually want to use original content as a revenue stream as well, but more recently cautioned that we won’t see a lot of return in the near term.

All of this means good news and bad news for investors. GoPro seems to actually have a strategy to not become the next Flip. But one has to wonder whether the company has enough time to execute on these plans and survive as a stand-alone company, or whether its products will be commoditized before it is able to reinvent itself.