GoPro (GPRO -1.46%) hasn't launched any flagship cameras since the Hero 4 Silver and Black in late 2014. Last year, it launched the low-end Hero+, the mid-range Hero+ LCD, and the high-end Hero 4 Session. None of those devices were big hits with consumers, and GoPro's sales rose just 16% for the year, down from 41% growth in 2014.

Image source: GoPro.

Demand for the Session was so weak that GoPro had to slash its price from $400 to $200 before any buyers showed up. Margins fell as sales of the cheaper devices cannibalized those of the higher-end ones, so GoPro discontinued the entry-level Hero, Hero+, and Hero+ LCD earlier this year. GoPro now only sells three cameras -- the Hero 4 Session, Silver, and Black.

Looking ahead, the holiday quarter will be a crucial one for GoPro, since it plans to finally release its new Hero 5 flagship devices and its long-delayed Karma drone. Analysts expect sales of those two devices to boost GoPro's fourth quarter revenue by 54% annually, helping it finish the year with a 14% sales decline. Unfortunately, the recently leaked specs for the Hero 5 indicate that the new flagship cameras won't represent a huge leap forward from the Hero 4.

Image source: GoPro.

Is this the GoPro Hero 5?

Leaked images of the Hero 5 indicate that the device will have a similar form factor as GoPro's current lineup of cameras, contrary to earlier reports which suggested that it would retain the Session's cube-like design. The two biggest changes appear to be a touchscreen on the back and a built-in waterproof housing.

Mirrorless Blog claims that the device will have a USB-C connector, a slightly larger 1,220 mAh battery, a built-in GPS, and support for voice controls. The leaked specs also indicate that image stabilization would be available for all the models, but would only work on resolutions under 4K.

It also appears that the highest-quality video mode for all models would be 4K at 30 fps. If that's true, it would merely match the Hero 4 Black's highest video setting. Like the Hero 4 Black, the Hero 5 is expected to offer higher frame rates (as high as 120 fps) at lower resolutions. It's unclear if GoPro will use a newer image sensor from Sony or a new image processing SoC from Ambarella (AMBA -1.59%), but the rumored specs look pretty underwhelming for current owners of the Hero 4 Black.

It doesn't measure up to the competition

The action camera market has also drastically changed since GoPro launched the Hero 4 two years ago. TomTom introduced the Bandit, a camera that can bookmark parts of videos based on the user's movements, acceleration, and heart rate for easy editing. Samsung, Kodak, Ricoh, and 360fly launched affordable 360-degree cameras for capturing panoramic photos and videos for VR. Other companies, like 4GEE and BenQ, installed Qualcomm's mobile-based SoCs into their action cameras for stand-alone 4G connectivity.

Samsung's $350 Gear 360. Image source: Samsung.

Yi Technology released a 4K action camera powered by the same Ambarella SoC as GoPro's Hero 4 Black for half the price at $250. Yi even added image stabilization and a touch screen -- two key features the Hero 4 Black lacked. Alphabet (GOOG 0.29%) (GOOGL -0.23%), which previously only partnered with GoPro in its Jump VR initiative for YouTube, signed a similar deal with Yi -- likely because it would be cheaper to create VR rigs with Yi's cameras than with GoPro's.

For the Hero 5 to be a hit this holiday season, it will need to stand out in that crowded market with superior features and competitive prices. But if the leaked specs for the Hero 5 are accurate, the only features that set it apart are its waterproof housing and voice controls. It's doubtful that customers -- either old or new ones -- will pay $400 to $500 for those features.

The key takeaway

GoPro bulls believe that the company's lackluster sales growth in 2015 was caused by its misguided attempts to reach mainstream consumers with its cheaper devices, and that the launch of new "numbered" Hero 5 flagship devices this year will get its growth back on track.

Unfortunately, a more likely story is that the company's action cams simply filled out their niche with the strong sales of the Hero 4. Since mainstream displays haven't moved beyond 4K yet, there's no demand for higher resolution cameras, and the Hero 4 Black -- along with most high-end smartphones -- already record decent 4K videos. As a result, it's highly unlikely that the Hero 5 can generate enough sales to reverse GoPro's ongoing decline.