Nicholas Woodman: Learning in Business is the Ultimate Action Sport

Nicholas Woodman has had a tough go at GoPro (GPRO).  After a July 2014 post IPO value of USD 3.5 billion which quickly climbed to USD 10.9 billion by August, its market capitalization has experienced bumpy slog downward to a mere USD 1.4 billion by November 2016.  What went wrong?  Can it be fixed?

2014 Off to a Good Start

GoPro started 2014 in a strong position.  According to market researcher IDC, GoPro was the top-selling camcorder maker in the world by volume.  Revenues in 2013 exceeded USD 986 million with a profit margin of 37%—pretty decent for a newcomer in the consumer electronics market.

By February 2015, they were reporting revenue up 75% over the same holiday quarter last year to USD 634 million.  Profits were also looking up.  GoPro reported profits of USD 122 million, up from 43 million over the same quarter last year.

So far, so good for the action camera maker.

Sporting enthusiasts raved of the GoPro.  People began using them to record their bike trips, hiking trips, motocross, snorkeling, skiing, surfing, rock climbing, kayaking, just about every activity.  For anyone in an active lifestyle, GoPro was emerging as the brand to love.

2015 Going for Gold

GoPro announced its Hero4 Session to much fanfare in the summer of 2014.  Priced at USD 400, it took full-HD videos, could handle depths up to 10 meters, and stabilized pictures taken from moving body parts.  It was a must have for extreme athletes.

I suspect Mr. Woodman believed that the GoPro could become the hot item for the holiday season.  But $400 seemed a bit high for the average consumer.  Why not drop it?  If the price was lower, then more people may buy it, and GoPro may become a consumer product giant.  Perhaps it could join the leagues of Apple, Cannon, and Sony?

Presumably following this logic, Mr. Woodman dropped its price by 50% to a mere $199 for the Christmas sales.

The sales didn’t come.

2016 Learning

By January 2016, the results of this poorly considered experiment were apparent.

In May 2016 reporting, revenue had declined sharply by 49% over the same quarter last year.  Profits which had been USD 22.3 million turned into losses of USD 108 million for the quarter.

It turns out, not everyone is an adrenaline junky.  Not everyone wants to record their lives (some prefer to live one). Not everyone wants to share videos of their accomplishments (some of us cherish a more reserved and humble lifestyle).

It turns out GoPro is a great brand for a niche market, not the mass market.  The mass market demonstrated satisfaction with taking videos and selfies with smartphones.

Thankfully, Mr. Woodman appears to have learned this lesson.

Acting on Learnings

In summer 2016, GoPro released its Hero5 Black at $400 and Hero5 Session for $300.  Finally, a price menu with variation in benefits and prices to hit a broader market segment.  This is a sound pricing strategy.  Though, I would have expected a $100 higher price on the Hero5 Black, but have no evidence that the higher price would have worked.

As the holiday shopping season is upon us, I feared Mr. Woodman would repeat the same error and drop prices.  He hasn’t.

They also released its Karma, a drone designed to hover the Hero5 to catch the action from an aerial viewpoint.  Device problems with the Karma forced a recall.  These things happen.  For Mr. Woodman, this must be like grinding salt in a wound though.

Mr. Woodman seems to have learned his pricing lesson at least.  Low prices don’t always translate into more sales.  Some markets are highly inelastic.

The niche market segment of action sport enthusiast that want to record their activity and accomplishments is only so large.  A lower price on a device to record activities won’t increase the size of that niche market.  Therefore, a lower price can’t be justified on the basis of hyper-charging unit sales.

Learning in Business is the Ultimate Action Sport

Learning how to compete in the game of business is the ultimate action sport.  Mr. Woodman learned one lesson.  Now to learn how to profitably build a business: manage costs and product development, grow brands that your niche will love and promote, keep talent that not only love sports but also know how to create business success.

Given GoPro’s current market capitalization, I wouldn’t say that Mr. Woodman could go back to the trough and raise more money that way.  Instead, he now has to take the long slog back through stability and into growth.  There will be much more to learn and unexpected challenges in this marathon.

I wish him well and will keep spectating his performance, for I too am running my own marathon at Wiglaf Pricing.