GoPro Faces Extreme Choices As Action Camera Sales Nosedive

Hey, these are extreme times, so if the current business model isn't working, just jump at a new one, right?

The issue for GoPro and most tech companies is not the initial launch, it's how to scale that first success to keep customers and investors engaged. JL

Therese Poletti reports in MarketWatch:

GoPro’s action camera faces an onslaught of rivals and the company’s editing software was hurting sales of its cameras. Its unique viewership was small and viewers tended to watch the same video multiple times, not a model that advertisers like.With cameras and its content business in doubt, (it) will have to look to drone(s) and virtual reality. These are both risky, competitive arenas, and in the case of drones, not within the company’s proven expertise.
GoPro Inc.’s stunning fourth-quarter revenue shortfall and job cuts announcement Wednesday sent investors scrambling for an exit, and with good reason: After its latest camera fell flat, the company’s longshot bets on other technologies will have to pay off.
Sales of GoPro’s GPRO, -17.32%  Hero4 Session seem to be the culprit for disappointing sales in the all-important holiday quarter, which Chief Executive Nick Woodman reportedly confirmed in an email to the soon-to-shrink staff. Introduced last July at a price of $399, the Hero4 Session camera saw its price slashed twice during the fourth quarter, with the second price cut to $199 in early December arriving as inventory was starting to build up during the holiday season.
While failing to find a new hit, GoPro’s action camera business faces an onslaught of rivals from Sony Corp. SNE, -1.51% TomTom TOM2, -2.03% and others. Additionally, analysts such as Morgan Stanley’s Katy Huberty have speculated that the company’s video editing software was hurting sales of its action cameras, an issue that could also affect future products.

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So with its core business under assault, GoPro must find a hit in other areas to continue growing at a pace investors expect from a technology company, namely its content initiative, drones and virtual reality. The first on that list also took a hit Wednesday, though: GoPro said that Zander Lurie was resigning as head of its entertainment business and joining its board, with Recode reporting the former CBS Corp. CBS, +3.17%  executive has agreed to take the chief executive role at SurveyMonkey.
A company spokesman did not immediately respond to a request for further comment.
Lurie was focused on creating new revenue streams from video content generated by GoPro users for its GoPro Channel, but his resignation does not bode well for the revenue potential of that business, which was already doubted by Wall Street. Global Equities Research analyst Trip Chowdhry wrote in a note last February that it would be difficult for GoPro to be a media company, noting that its unique viewership was small and viewers tended to watch the same video multiple times, “which is not really a model that advertisers like.”
Chowdhry checked in with more pessimism Wednesday afternoon, comparing GoPro to earlier hot startups that have suffered on the public markets like Groupon Inc. GRPN, +1.96%  and Zynga Inc. ZNGA, +1.05%
“Fundamentals just don’t exist,” he wrote, adding, “basically, investment thesis were being built on imagination.”
With the ability to launch new cameras and its content business in doubt, investors will have to look to future products for any thesis, such as the Karma drone and Odyssey virtual reality rig for professionals. These are both risky and increasingly competitive arenas, and in the case of drones, not within the company’s proven expertise.
The stock, a favorite of short-sellers amid a prolonged fall, plunged to less than $11 in after-hours trading Wednesday, lower than even some of the most pessimistic prognosticators on Wall Street. But unless GoPro can find growth in drones or virtual reality, the stock might have even farther to fall.