GoPro Looks to App Channels for Future Revenue Opportunities, It Says in IPO Filing

GoPro has sold more than 8.5 million HD video cameras since 2009, the company said in an S-1 SEC filing Monday in advance of a planned initial public offering. While the overall camcorder category has struggled for years, action camera maker GoPro had revenue of $234.2 million in 2011, $526 million in 2012 and $985.7 million in 2013, according to the filing. Profits for the three years were $24.6 million, $32.3 million and $60.6 million, it said. The company sold 3.8 million cameras in 2013, it said. For the quarter ended March 31, GoPro had revenue of $11 million in net income on revenue of $235.7 million, it said.

In the S-1, GoPro cited NPD Group data listing GoPro as the top-selling camcorder in dollars and units and among the top six camera accessories companies in the U.S. last year. It held 45 percent market share in cameras last year, according to NPD.

But the company is banking on ad revenue and sponsorships from content channels for future growth, it said. Among risk factors it cited slower growth estimates for action cameras. “We do not expect to continue to grow in the future at the same rate as we have in the past and profitability in recent periods might not be indicative of future performance,” it said.

A future revenue opportunity for the company is GoPro Network, its collection of GoPro channels found on various platforms. The company is expanding the distribution of GoPro programming “to engage and build relationships with even those consumers who do not own a GoPro capture device.”

GoPro expects to start generating revenue this quarter from advertising and sponsorships on GoPro channels that appear on platforms including Xbox Live, it said. In addition to ad revenue and sponsorship deals, GoPro plans to sell products directly to consumers as they view content. The company expects to begin generating revenue from GoPro channel advertising and sponsorships on Xbox Live and from GoPro Channel ads on YouTube and Virgin America this quarter, it said. It does not expect revenue from those initiatives to be “material” this year, it said.

GoPro has a three-pronged product market strategy around capture, manage and share. The company said its desktop software, GoPro Studio, and the GoPro app for mobile devices “reflect the early stages of its content management platform strategy.” At the end of March, 4.3 million downloads of GoPro Studio had been logged, and customers exported on average 20,000 videos per day using the software, the company said. In 2013, customers uploaded “2.8 years’ worth of video” to YouTube with the GoPro name in the title, the company said. During Q1 2014, consumers uploaded an average of 6,000 videos taken with GoPro cameras and had more than 1 billion views, it said.

GoPro hopes to capitalize on the trend of mobile devices displacing traditional cameras and camcorders by offering “differentiated capabilities.” A goal is for GoPro to be “the first media company whose content is captured exclusively using its own hardware,” it said. The company positions its GoPro App as complementary to mobile devices because it can be used to remotely control GoPro cameras, “optimizing customers’ ability to self-capture high-quality content of themselves and their activities,” it said. The GoPro App enables customers to manage and share their captured content online via a smartphone or tablet without the need for a computer, it said.

The company’s distribution strategy is through specialty retailers such as surf, ski and motorsports outlets where GoPro “is often the only capture device sold in-store,” the company said. Its sales network comprises more than 25,000 stores globally, it said.

Additional risk factors the company could face: competition from much bigger companies with more history and broader distribution, and a reliance on third-party suppliers for components. Citing competition from established camera manufacturers including Canon, Nikon, Olympus, Polaroid and Vivitar, as well as large, diversified electronics companies such as JVC, Panasonic, Samsung, Sony and Toshiba -- along with specialty company Garmin -- GoPro touted its “durable and versatile product design” that includes wearability. The company’s mounts and accessories enable consumer use cases that are “difficult” for competitors’ products to address, it said.

As of Dec. 31, GoPro had 661 employees -- 283 in research and development, 232 in sales and marketing, 31 in manufacturing and fulfillment and 115 in general and administrative, the company said. As of March, it added 44 employees in finance, product development and manufacturing in Shenzhen, China, and in Hong Kong. Thirteen employees work from the European office in Munich, it said.