Today TASER International (AXON -2.41%) made its boldest move yet to take over the body-camera market. It offered an Axon Body 2 camera for every sworn officer in the U.S. and a full year of Evidence.com and training assistance. This is a bet that the company can ingrain itself in the law-enforcement system, in a way that will be nearly impossible to untangle once implemented.
To show its seriousness about transitioning from a Taser-focused business to body cameras, TASER International is also changing its name to Axon, which will come with the new ticker symbol AAXN, effective tomorrow. As founder and CEO Rick Smith said in a press release, this is an "all-in" bet on the future of body cameras.
Image source: Axon.
A body camera for every officer in the U.S.
Axon's free offer to law enforcement could change the game in the body camera industry. It could increase adoption of body cameras nationwide, while also squeezing out competitors who can't match such an offer. Here's what law enforcement would get:
- One Axon Body 2 per officer
- One Evidence.com Unlimited Pro license per officer for one year
- Two mounts per officer
- Docks for the station
- Camera deployment support
- Unlimited Axon Academy access for e-learning
- Two free passes to the Axon Accelerate conference per agency
This will be an extremely attractive offer for law enforcement agencies looking to try body cameras and for small jurisdictions that might not have the buying power of a big city. And it'll be tough for competitors like Vievu to match such an offer.
The intention of this free offer is to get officers using the Axon system. The company is selling body cameras as an easier way to record data, a way to reduce paperwork, and an effective tool to reduce violence and increase conviction rates. If customers are attracted by a free offer and get used to using the system, it'll help Axon in the long term, because the real value isn't in the body camera sale, it's in the cloud services and recurring revenue from those services. And once law enforcement starts using those services and seeing their benefits, it'll be hard to get away from them.
What this offer will also do is put pressure on Axon's finances in the short term. But that's a trade-off management is willing to make, if it means expanding the body camera market and grabbing a larger percentage of market share at the same time.
Profitability might now be years away
Even as Axon was building out its body camera products, it was sacrificing short-term profits for long-term profit potential. It beefed up research-and-development spending and sales staff, which hurt net income even as revenue rose:
TASR Revenue (TTM) data by YCharts.
This trend will likely continue given the free body camera offer, which will likely cost millions, depending on the adoption rate. But if adoption of the body cameras and contracts for Evidence.com and other services increase after this offer, it could pay off in spades. The company recently stopped reporting Axon body camera service margins -- which include Evidence.com -- but in the past they've been as high as 80%. Giving away cameras in return for a multiyear service contract with 80% margins is a great trade in any business.
A free product offer could also alleviate some of the competitive pressure the company has been feeling in the body camera business, driven by aggressive bidding by competitors. And if Axon is successful in getting body cameras into the hands of tens of thousands of law enforcement officers with this new offer, it could be a home run for long-term investors.
