GoPro Inc's (NASDAQ:GPRO) Fusion camera may be the leading spherical camera in terms of volume and dollars sold, but it's far from a revenue driver for the action camera maker. And early in its life cycle it may be facing the same pricing challenges that GoPro has been facing for years with traditional action cameras. 

The company recently discounted the Fusion to $499.99 for the holidays, and it can be had for $449.99 with the trade-in of an old digital camera. That's an incredibly affordable price given the advanced features of the camera and the low volumes being produced. Is the discounted price a sign that GoPro wants to dominate the 360 video market, or a warning the product isn't selling well at all? 

GoPro's Fusion camera.

Image source: GoPro.

The bullish view of Fusion

When it comes to capturing market share of the nascent 360 camera market GoPro has done a great job. According to NPD Group, the company has a 47% share of the market, and most competitors aren't nearly as focused on 360 cameras as GoPro. Samsung, Kodak, and Garmin are three of the biggest 360 camera competitors, but they all have other businesses to worry about and haven't made the 360 camera market a major focus. That leaves GoPro on top almost by default.

This isn't dissimilar to the position GoPro had in the action camera market in the 2000s. It was a small but growing, market and GoPro had a dominant market share. Will lowering prices to maintain high market share will keep competitors out and repeat the high market share strategy the company used with great success in action cameras? 

Why investors should be worried

The problem is that GoPro has spent a lot of time and money building the Fusion business. It acquired Kolor in 2015 for an undisclosed sum, and has spent millions developing both the camera and the software behind it. 

On top of the investment, 360 video is an extremely small market right now. According to Statista, wholesale sales of 360 cameras in the U.S. were estimated at just $65 million in 2017, compared to $1.94 billion of wholesale digital camera sales in the U.S. in 2017. Even with high market share, 360 cameras are only a small portion of GoPro's $1.1 billion in revenue over the past year.

The stakes for Fusion are high too. After the failure of the Karma drone, GoPro can't afford to have another high-profile failure. Fusion is the only product expansion in the company's portfolio, and it needs to succeed if the company is going to grow long-term -- and it's not clear yet when Fusion will make a significant impact on the income statement.

Fusion needs to stay one step ahead

GoPro will continue to struggle with a small market for 360 cameras, but if it can use an accessible price point to dominate the market it may have another big winner on its hands. But slow growth may mean the payoff is still many years away. Action cameras took a decade to become a major business, and GoPro hopes 360 cameras can reach maturity a little more quickly. 

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