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TEACHING NOTE
CASE 15
GoPro’s Struggle for Survival in 2016
Overview
As GoPro moved into 2015, it appeared to be the poster child for American entrepreneurial success, going
from a humble beginning as a homemade camera tether and plastic case vendor in 2004, to an action
camera vendor with $350,000 in sales in 2005 (its first full year of operation), to revenue of $1.6 billion in
2015. The company had gone public in June, 2014, and at its peak in October, 2014, GoPro stock traded at over
$98.00. In 2014, GoPro was ranked #1 most popular brand on YouTube with more than 640 million views, and
an average of 845 thousand views daily. In 2015, the average daily views were up to 1.01 million. Abruptly, in
the third quarter of 2015, GoPro’s magic disappeared. Fourth quarter, 2015 revenue dropped by 31 percent from
the prior year, and net income (loss) fell by 128 percent to a net loss of $34.5 million. By the end of December,
2015, the stock traded at less than $20.00.
GoPro’s sales continued to slip in 2016: in mid-January, the company’s stock was selling at less than the IPO
Despite the crash in sales and profit, GoPro was the undisputed market leader in action cameras, with 85 percent
market share, according to the company’s management. Despite the problems, GoPro’s management continued
to be upbeat as it attempted to sell its action cameras in the stagnant niche. An exclusive agreement with Red Bull
*This teaching note reflects the thinking and analysis of the case author, Professor David Turnipseed, University of South Alabama.
We are most grateful for his insight, analysis and contributions to how the case can be taught successfully.
*
Case 15 Teaching Note GoPro’s Struggle for Survival in 2016
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crowded drone market, or develop software that did not provide profit, Woodman’s options could be limited to
downsizing, moving to different markets (e.g., body camera for police, security camera, dash cameras), searching
for a new type of product to sell, or thinking of GoPro as an attractive acquisition by a larger company.
Suggestions for Using the Case
You will find students eager to discuss the case because of their familiarity with GoPro’s camera products and
videos. Many students are also likely to own GoPro (or competitor) action cameras and to be regular viewers of
the company’s huge YouTube and other content sharing video libraries. This case is ideally assigned during your
business strategy module since it was written to illustrate such concepts from Chapters 3 and 4 concepts as the
macro-environment, business model and corporate strategy, Porter’s Five Forces Analysis, company resources
and capabilities and company financial analysis. In addition, a proper analysis of the case prepares students to
make recommendations concerning the company’s next strategic and financial moves.
Videos for Use with the GoPro’s Struggle for Survival in 2016. There is are two videos that you may
wish to show during the class discussion of the case (or have students watch on their own).
The assignment questions and teaching outline presented below reflect our thinking and suggestions about
how to conduct the class discussion and what aspects to emphasize.
To give students guidance in what to think about and what analytical tools to utilize in preparing for the GoPro’s
To facilitate your use of study questions and making them available to students, we have posted a file of the
assignment questions contained in this teaching note for GoPro’s Struggle for Survival in 2016 case in
the instructor resources section of the Connect Library. (We should also point out that there is a set of study
questions posted for each of the cases included in the 21st edition.)
Case 15 Teaching Note GoPro’s Struggle for Survival in 2016
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Suggested Assignment Questions for an Oral Team Presentation or Written Case Analysis
This case works very well for oral team presentations and for written assignments. We suggest the following
questions:
1. As a consultant to Mr. Woodman and the GoPro management team, you have been asked to prepare an
assessment of the company’s strategy over the past three years, beginning with the IPO in 2014, and
continuing up through 2016. The GoPro Annual Report, 2015, set out the company’s strategy as:
Does the present business model and strategy have good strategic fit with the market? What brought
GoPro to the point of negative earnings? Should the present focused product mix be maintained or
should it be expanded, and if so, how? Your report should include suggestions to improve the company’s
2. In April, 2016, the investment bank Piper Jaffray reported that GoPro was gaining market share in a
declining market, and that action camera ownership declined to 28 percent among teenage consumers,
down from 31 percent a year previous, and 40 percent in 2013. This trend clearly indicated the need
in post-production.
You have been hired as a consultant to GoPro. The Board of Directors has asked for your evaluation
of GoPro’s product strategy (i.e., hardware manufacturer and software development). Specifically, the
Assignment Questions
1. What are the strategically relevant factors in GoPro’s macro-environment? What does a PESTEL analysis
reveal about the action camera in 2016? Does the external environment of the drone industry present
attractive opportunities to GoPro?
2. What is your assessment of GoPro’s business model and competitive strategy? Does its approach to delivering
customer value contribute to a sustainable competitive advantage?
3. What are GoPro’s key resources and competitive capabilities? What is the competitive power of its most
important competitive assets?
Case 15 Teaching Note GoPro’s Struggle for Survival in 2016
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4. What is your assessment of GoPro’s financial performance the past three years? (Use the financial ratios in
the Appendix of the text as a guide in doing your financial analysis.)
5. Based on the preceding analysis, what is your overall evaluation of GoPro’s business situation in 2016?
Does the company’s strategy have the potential to provide the company’s shareholders with an opportunity
for above-average market returns in the next 3–5 years?
6. What strategic actions could Mr. Woodman take to reestablish GoPro’s financial and market performance?
Teaching Outline and Analysis
1. What are the strategically relevant factors in GoPro’s macro-environment? What does a
PESTEL analysis reveal about the action camera industry in 2016? Does the external
environment of the drone industry present attractive opportunities to GoPro?
GoPro’s macro-environment is generally favorable. The strategically relevant factors in the company’s
macro-environment that are of sufficient magnitude to have influence on the company’s long-term direction,
objectives, strategy and business model are the economic conditions (favorable), socio-cultural forces
(very favorable), and technological factors (a driving force in the action camera industry). The political,
environmental, and legal/regulatory factors certainly influence the action camera industry to some degree,
but there is insufficient evidence to suggest that they are strategically relevant.
nPolitical
nEconomic Conditions
The economic conditions facing the action camera industry were generally favorable. Although the
recovery from the Great Recession had not been spectacular, there was domestic economic growth, low
nSocioCultural Forces
Sociocultural forces had a large positive impact on the action camera industry. The sociocultural values
significantly contributed to the action camera industry with the increase in popularity of social media.
The growing population segment that embraces active lifestyles further impacts the demand for action
cameras. Although smart phones are a very acceptable substitute for action cameras for many people,
Case 15 Teaching Note GoPro’s Struggle for Survival in 2016
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nTechnological Factors
Rapid technological change and constant advances in technology are the hallmark of the action camera
and drone industries. Technology is a major driver of change in the action camera industry and a large
nEnvironmental Forces
There is no data given in the case to suggest any unique influence of environmental factors on the
nLegal/Regulatory
There is no information presented in the case that points to any legal or regulatory influence on the
action camera industry. However, the legal/regulatory environment was potentially problematic for the
occasional drone encroachment in inappropriate places (e.g., the lawn of the White House, airports),
suggests that additional legislation and regulation of the industry may be expected. Given that the initial
2. What is your assessment of GoPro’s business model and competitive strategy? Does its
approach to delivering customer value contribute to a sustainable competitive advantage?
GoPro’s business strategy was to develop product solutions which enabled consumers to capture, manage,
share and enjoy some of the most important moments in their lives. In addition to selling action cameras to
capture live events, the company developed GoPro Entertainment, and planned to diversify into a number of
related businesses, including software and drones.
GoPro focused on product leadership and innovation in their cameras, and also in mounts, accessories,
and batteries. The company increased its focus on solutions designed to simplify organizing, editing, and
The case states that Woodman understood, in 2016, that “the hardware-first chapter of GoPro” was coming
to the end. He recognized that market saturation had created the problem, explaining it as “content guilt.”
According to Woodman, “Most people don’t even watch their GoPro footage.” He blamed the company
for creating the problem by solving the capture side but leaving customers hanging in post-production. In
Case 15 Teaching Note GoPro’s Struggle for Survival in 2016
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been made as a hardware company, and moving that reputation to a new market (i.e., software) would be
difficult. GoPro created the market for wearable cameras, but it found the content-creation software field
GoPro’s strategy had been developing and changing. The initial strategy had been simple: develop and sell
action cameras, and this strategy was very successful in the early years of the action camera industry. The
GoPro’s strategy did not contribute to a sustainable competitive advantage. A sustainable competitive
advantage is a company’s ability to provide its customers with superior value, compared to rival sellers, or
In summary, GoPro’s strategy was not a winner. It failed the three tests of winning strategy:
1. It is not a good fit with the situation. There has been marginal internal fit: the company is number one
competitive advantage, are unlikely to produce superior performance for more than short periods, which
has been the case of GoPro. Great strategies push a company to a competitive advantage over rivals that
is long lasting.
action cameras, and thus has a good market standing, it does not have stellar competitive strength. The
numerous new entrants are testimony to GoPro’s lack of a domineering competitive position.
The most glaring indication of a subpar strategy is GoPro’s poor profitability. The slipping gross margin
and recent negative income is an indication of deficient strategy. The company has made attempts at
3. What are GoPro’s key resources and competitive capabilities? What is the competitive
power of its most important competitive assets?
KEY RESOURCES
GoPro’s key tangible assets:
n Technological resources: GoPro had very good innovation technologies which gave the company the
Case 15 Teaching Note GoPro’s Struggle for Survival in 2016
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nFinancial resources: Go Pro is very solvent (current ratios in 2014 and 2015 of 3.18 and 2.82,
The key intangible resources:
nThe company’s brand name: due largely to its good products, the well-developed sales channels, the
nHuman assets: GoPro has a core group of employees who have been able to place the company at
number one in the industry. The innovative capabilities of the employees combined with their ability
cameras served the company extremely well.
nGoPro’s marriage of product and company image with a large presence on social networking sites: The
company began to increase emphasis on software and video sharing in 2015, and in that year GoPro tied
with Apple on the Google Brand Leaderboard, which measures the most popular brands on YouTube.
Another 2015 development was the GoPro Channel on the PlayStation Network which allowed
PlayStation owners to stream GoPro content on-demand, and browse GoPro cameras and accessories.
Note: Some students will argue that the results of GoPro’s combination of content sharing, content
sharing software, and content distribution do not constitute an intangible resource because they do
nRelationships with influential endorsers: GoPro’s lifestyle marketing emphasized expansion of their
brand awareness by engaging consumers through relationships with influential athletes, entertainers,
brands, and celebrities who used GoPro products to create and share content with their consumers
and fans. An example is the exclusive agreement with Red Bull on distributing and selling content.
The company worked directly with their lifestyle partners to create content that was leveraged to their
mutual benefit across the GoPro Network.
COMPETITIVE CAPABILITIES
Competitive power of the most important competitive assets: The most important competitive assets
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The first two VRIN tests determine whether the competitive assets can support a competitive advantage, and
the second two determine whether the asset is sustainable. The VRIN tests, with respect to GoPro’s most
important competitive assets are:
nStrong brand name:
libraries of GoPro content kept the brand name visible to millions of customers and potential
customers each day.
• Rare — FAIL: The GoPro brand is well-known and strong (GoPro is the market leader). However,
• Inimitable — Pass: GoPro was the first in the action camera industry and thus the company has the
longest history in the industry. Their product history is good and the brand is associated with a huge
nHuman assets:
• Valuable — PASS: GoPro’s human assets are strong, and have propelled the company to the number
one market position.
• Nonsubstitutable — Fail: GoPro’s advantage cannot be sustained with its human resources. As
the company reduces its workforce, the strength and value of its human resources are diminished.
4. What is your assessment of GoPro’s financial performance the past three years? (Use the
financial ratios in the Appendix of the text as a guide in doing your financial analysis.)
GoPro’s stock performance, common size balance sheet and income statement are provided below. From
Exhibits 7 & 8, students should notice several problematic areas. First, despite healthy increase in revenue
(CAGR of revenues, 2011–2015, from Exhibit 7 was 64.13 percent), gross profit over the same period grew
at a slower rate (CAGR = 53.1 percent), and operating income (CAGR = 9 percent) grew even less. These
Case 15 Teaching Note GoPro’s Struggle for Survival in 2016
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GoPro went public in June, 2014. After the IPO at $24.00, GoPro’s stock price appreciated rapidly and
within four months (early October, 2014) was selling at $87.00, 360 percent of the IPO price. The stock then
declined to a $40–$50 trading range for a few months, and then went up to $63.00 in early August 2015.
INCOME STATEMENT DATA
Common Size Income Statement
2015 2014 2013
Revenue 100.00% 100.00% 100.00%
Cost of revenue 58.44% 55.01% 63.30%
Gross profit 41.56% 44.99% 36.70%
Operating expenses:
Operating income 3.38% 13.42% 10.01%
Other expenses, net -0.13% -0.43% -0.75%
From the common size income statement above, notice that cost of revenue turned up in 2015. Also, research
and development expense and sales and marketing expenses increased in 2015, which contributed to a total
Three months ended
12/31/2015 vs 12/31/ 2014
Percent Change
Year ended:
12/31/2015 12/31/2014
Percent Change from Prior Year
Revenue -31% 16% 41%
Cost of revenue -7% 23% 23%
Gross profit -58% 7% 73%
Operating expenses:
Operating income -124% -70% 89%
Net income -128% -72% 114%
Case 15 Teaching Note GoPro’s Struggle for Survival in 2016
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From the table above, notice that in 2015, the cost of revenue increased almost 50 percent more than the
The increases in R & D expenses were significant multiples of the revenue increase in 2014, and 2015. In
the three months ending 12/31/2015, R & D expenses showed a continued increased despite a 31percent
decrease in revenue. At first glance, this indicates cost control or mismanagement problems; however, R &
The increase in general and administrative expenses should be cause for concern. The 198 percent increase
2013–2014 (five times the increase in revenue) followed by a 15 percent increase 2014–2015 (which is almost
Selected Financial Ratios for GoPro: 2013–2015
12/31/15 12/31/14 12/31/13
Liquidity:
Current ratio 2.82 3.18 1.19
Quick ratio 2.19 2.59 .82
Working capital (in thousands) $772, 033 $641,204
Profitability:
Leverage:
Debt-to-equity 43% 43%
Calculated from GoPro Case Exhibits 8 & 9
The above ratios reinforce the earnings problem, caused largely by increased expenses. Also, the ratios
indicate sufficient liquidity for the short term and possibly some capacity for additional debt.
5. Based on the preceding analysis, what is your overall evaluation of GoPro’s business
situation in 2016? Does the company’s strategy have the potential to provide the company’s
shareholders with an opportunity for above-average market returns in the next 3–5 years?
GoPro’s business situation in 2016 went from poor to dismal. GoPro’s management provided warning
guidance for investors for the first quarter and full year of 2016, which indicated the seriousness of the sales
and earnings downturn. First quarter sales were forecast to be less than first quarter 2015 sales and full year
Case 15 Teaching Note GoPro’s Struggle for Survival in 2016
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The GoPro Channel launched SkyQ, a next-generation home entertainment system, in early 2016. GoPro
videos became available on two of the globe’s largest TV platforms — Comcast in the U.S. and Sky, with
January, 2016, was particularly difficult for GoPro. Apple received a patent for a remote-controlled camera
system, and Sony introduced a new high-resolution camera. Also in January, the company cut its workforce
by 7 percent, which would cost the company $5–10 million in severance costs. GoPro announced that the
company would stop offering any future quarterly guidance, and that its CFO, Jack Lazar, would leave the
company in March, 2016.
GoPro is and always has been in a niche market — and the niche is largely satiated. When you discuss this
question in class, ask your students how many own a GoPro (and several will) and how many plan to buy
Another problem that will likely contribute to GoPro’s inability to provide acceptable market return over
the next 3–5 years is the lack of competitive advantage. Although GoPro’s cameras have a good reputation,
GoPro appears to have overestimated the value and staying power of its brand. In 2015, GoPro tied with
Apple on the Google Brand Leaderboard, which measures the most popular brands on YouTube. According
to Google, more than 4.6 years of content was uploaded to YouTube in 2015 with GoPro in the title, an
increase of 22 percent from 2014. Also in 2015, the company launched the GoPro Channel on Amazon
Fire TV and Fire TV Stick with a custom-designed streaming channel that was a one-stop destination for
media or the company’s software. Nor does that brand awareness assure brand loyalty or repeat purchases.
The absence of a way to monetize the brand will reduce the ability of GoPro to provide shareholders with
above average (or even average) market returns over the next 3–5 years.
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Many of GoPro’s investors bought their shares when the stock was selling a large multiple of its present
price, apparently believing that the action camera industry had significant growth potential: the rapid decline
and continued low trading range suggests that is not the case. There is no reason to expect GoPro’s stock
drone with an action camera selling for $380.00. The probability of success for a newcomer in the crowded
drone industry appeared to be increasingly remote. The fate of Karma add further uncertainty and doubt
about GoPro’s ability to provide shareholders with above-average returns in the next 3–5 years.
GoPro appears to be in serious market and financial trouble. There is no reason to expect the company’s
action camera revenue to climb back to its 2015 pre-crash level in the next 3–5 years, if at all: the only hope
for GoPro in the short term is the Karma drone. Being a late entrant to the drone market, there is doubt that
by 645 percent and net income decreased by 742 percent from the same period in 2015. The negative
operating income ($121,435 million) for the first quarter of 2016 was 645 percent below the same period the
prior year and the net loss of ($107,459 million) was 742 percent below the prior year.
If revenue and income remain low, per share earnings will not boost the stock back to its pre-crash levels.
According to Time (4 February, 2016) GoPro is unlikely to ever return the market value of $12 billion which
occurred a few months after its IPO. GoPro’s market value in mid-2016 was about $1.25 billion, which was
6. What strategic actions could Mr. Woodman take to reestablish GoPro’s financial and market
performance?
According to Time (4 February, 2016), GoPro is unlikely to ever return the market value of $12 billion which
occurred a few months after its IPO. GoPro’s market value in mid-2016 was about $1.25 billion, which was
less than the company’s annual revenue. Although GoPro was still the market leader in action cameras,
there was no obvious choice among the paths being considered for the company to reverse its decline and
Case 15 Teaching Note GoPro’s Struggle for Survival in 2016
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reestablish profitability. The company was depending on the Karma drone to be its savior, and while that
was possible, it appeared quite unlikely. There were many drone manufacturers, both foreign and domestic,
brand name is constantly reinforced.
Rather than concentrate on new hardware to sell in the saturated action camera market, enter the crowded
drone market, or develop software that does not provide profit, Woodman’s options could be limited to
thinking of GoPro as an attractive acquisition by a larger company, or to diversifying its product line with
Epilogue
The Karma drone, heralded as the savior of GoPro, went on sale 23 October, 2016, after numerous delays. In two
and a half week, on 8 November, 2016, GoPro announced a recall of Karma and halted sales: by mid-December,
2016, the company’s stock sold for less than $9.00/share. The drone experienced battery overheating and flight
GoPro’s recall of their Karma drone will not only cause substantial damage to their financial situation, but will
put additional pressure on the beleaguered company. The Karma recall will result in a significant lost revenue.
Assuming the 2,500 Karma drones which were sold were purchased as bundles, and cost about $1,000, the
According to the suit, GoPro gave stockholders false and misleading information about the drone’s potential.
The suit further alleges that GoPro inflated the demand for Karma, which led to investors believing it could cause
a reversal of the company’s financial problems. Also, the suit accuses GoPro of not disclosing that the drone’s
