New Cash Rewards System Added to Company’s Media Empire
GoPro, Inc. (NASDAQ:GPRO) has hit a rough point these last few months, with many analysts growing increasingly bearish in regards to the rugged camera manufacturer. But are these sentiments warranted, or do investors have it all wrong when it comes to GoPro stock?
I would argue the latter, and here’s why.
For a company which is apparently crashing according to the big-name analysts like Morgan Stanley, GoPro’s sound financial balance sheet is the envy of many successful tech companies. (Source: “Here’s Why GoPro’s Stock is Dropping So Much,” Fortune, October 10, 2015.)
Would it surprise you to know that GoPro’s revenue levels have risen by 63% in the first six months of 2015, year-on-year? And projected revenue for the third quarter of this year has also been forecasted to soar by 53% relative to the third quarter of 2014. So what gives, then?
As it turns out, what investors are worried about and what is causing the precipitous slide in the GPRO stock price is slumping sales levels. But not in the way you might think, because GoPro is still selling massive numbers of cameras. What analysts are worried about is GoPro being unable to continue the percent rise in sales levels since last year, when the company generated 45% of its revenue during the holiday shopping season. Repeating that success this year on a percent basis will require more than $900 billion worth of sales, which is not likely to occur.
And there you have the crux of the issue; GoPro is being criticized for only posting excellent sales numbers instead of record-breaking ones. (Source: “GoPro Analysts Turn On The Company With A Vengeance,” Forbes, October 19, 2015.)
But this brings us full-circle, because GoPro management has a plan to increase the GPRO stock price.
How Does GoPro Plan to Re-Ignite its Earlier Success?
Most people know GoPro as the manufacturer of durable cameras you can take anywhere, and with good reason. The company is worth approximately $3.8 billion, and is now known for developing durable hardware which sets industry benchmarks.
But rather than being content to remain an action-adventure camera maker, GoPro has embarked on a larger vision of becoming a media empire.
Sound far-fetched? You’d be surprised.
GoPro is now offering generous cash incentives to users who produce quality content. (Source: “GoPro wants to become a full-blown media enterprise,” Business Insider, October 15, 2015.) The GoPro Awards will feature up to $5.0 million per year to those who dedicate their time to content creation. And that pushes boundaries and enters new media frontiers.
The company will be distributing cash prizes to users who generate content across many categories; including music, traveling, automobiles, animal, and comedy. (Source: GoPro Web Site, last accessed Oct. 19, 201.) Content creators will be awarded $500.00 per photograph, $1,000 for unedited clips, and $5,000 for edited videos.
Furthermore, overall winners will be selected from each category every week of the year, and will receive additional prizes. Best of all, the amount of media content one can submit is unlimited, so that no one is stock wondering whether or not their creations are worthwhile submissions.
What’s the Purpose of All This New Content Creation?
It’s at this point that you’re wondering how a camera manufacturing company can leverage a wide variety of pictures and videos to make profit.
That’s of course a good question. The answer lies in GoPro’s unique market position. GoPro has a highly disproportionate presence on social media relative to its size, with more than 3.4 million subscribers on YouTube alone for example. (Source: “Get paid to make GoPro videos with awards,” CNBC, October 14, 2015.) The strength, popularity, and viral tendencies of its videos are central to the company’s online success.
When we are talking about tens of millions of people watching high-quality homemade videos of kittens, puppies, or motorsport events, it does not take an MBA to figure out just how profitable a market segment it could be.
The success of its viral videos has been instrumental in GoPro’s success, with the popularity of clips corresponding to increased sales. But leveraging this audience is a tricky proposition, and the success of the GPRO stock price hinges on it.
But let’s turn back to the cash incentives GoPro will be offering its users in exchange for high-quality videos. The clips are intended for distribution on one of the company’s many social media platforms, in addition to the channels operated by GoPro on set top boxes such as Roku.
But it doesn’t end there, because GoPro has also embarked on an initiative to launch a license portal in July 2015. (Source: “Tap Into GoPro’s Licensing Portal,” PC Magazine, July 21, 2015.) And this is where the rugged camera manufacturer has hit pay dirt, because the rewards for this next move could cause the GoPro stock price to soar.
Under the current agreement, various agencies and brands pay a fee in exchange for a license to use images and videos created within the GoPro ecosystem. While GoPro receives a substantial amount in such cases, the original content creators are entitled to a set paycheck every time their videos and pictures are licensed out.
Now that’s what I call a win-win situation.
Where Does the Company Plan to Take this New Initiative?
For future expansion, GoPro executives have been quite explicit about plans for even wider content creation strategies being in the pipeline. (Source: “GoPro Nabs Sports Exec Bill McCullough From HBO,” Variety, October 19, 2015.) This includes symbiotic partnerships with huge global brands, but also expansion into media production and Hollywood.
What GoPro eventually visualizes itself as becoming is a streaming media business, and with well thought-out strategies and clever market moves like the ones outlined above, I would not be surprised if we see a huge upswing in the GoPro stock price.