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A Foolish Take: What's Next for the Action-Camera Market?

By Leo Sun – May 15, 2017 at 12:00PM

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Has this growing niche run out of steam?

A few years ago, a start-up called GoPro (GPRO 3.89%) carved out a high-growth niche in the stagnant camera market with its Hero action cameras. Sales of those cameras surged until 2015, but started sliding after GoPro -- and a growing number of rival camera makers -- seemingly saturated the specialty market.

A chart showing GoPro's annual revenue growth since 2013.

GoPro's annual revenue, 2013-2017. Data source: Quarterly reports, Analyst estimates.

Today's action-camera makers face two main challenges. First, smartphone cameras are good enough for many mainstream consumers, calling into question the need for stand-alone action cameras. Second, intense price competition and hardware commoditization are driving prices down.

To counter those headwinds, manufacturers are developing next-generation cameras for capturing 360-degree content. These panoramic videos can be viewed by swiping through a video, moving the mobile device, or wearing a virtual reality headset. These "niche within a niche" devices include Samsung's Gear 360, Ricoh's Theta, Kodak's PixPro SP360, and GoPro's upcoming Fusion.

Despite the recent speed bumps, the action-camera market could still keep growing. Research firm Global Market Insights expects the size of the global action camera market to grow at a compound annual growth rate of more than 22% between 2016 and 2023 -- so companies like GoPro could still have room to run.

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Leo Sun has no position in any stocks mentioned. The Motley Fool owns shares of and recommends GoPro. The Motley Fool has the following options: short January 2019 $12 calls on GoPro and long January 2019 $12 puts on GoPro. The Motley Fool has a disclosure policy.

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