GoPro (NASDAQ:GPRO) is getting killed lately because of weak sales of its latest HERO4 Session cameras and soft guidance for the upcoming holiday quarter. The stock has plummeted more than 60% so far this year as a result. Shares are now trading around $25 apiece or within a stone's throw of the company's initial public offering price. However, investors should be thinking long-term instead of panicking.
GoPro is aggressively positioning itself as an entertainment and streaming company today. If the mountable camera maker's recent initiatives in the digital space come to fruition, it could mean big things for the stock and patient shareholders down the road. Here are three reasons that GoPro is destined to be an entertainment star in the years ahead.
A rewarding approach to content generation
Nick Woodman, GoPro's visionary founder and chief executive, understands the value of crowd sourcing. The company's latest attempt to own the most engaging content on the planet is to employ the masses. You see, the camera maker recently announced its GoPro Awards program, which pays consumers for sharing the pictures and videos they capture with their GoPro devices. The company plans to dole out as much as $5 million to these content providers each year. Those whom want to participate can submit their most compelling content to GoPro.com/awards.
Participants can earn as much as $500 per photo, $1,000 for raw video clips, and $5,000 for edited video footage. The initial response to this launch has been wildly successful for GoPro. The company received more than 27,000 submissions in the first week after announcing the program, for example, which was an increase of 550% over the prior week, according to Woodman.
In addition to playing a key role in GoPro's growing entertainment and streaming business, this also creates a competitive moat for the company. In order to participate in the rewards program you must be capturing the content on a GoPro device. This gives consumers a compelling reason to buy GoPro gear over rival products in the space. Additionally, as more GoPro content goes viral it acts as word-of-mouth marketing for the company and its products thereby further fueling sales.
This should create a lucrative cycle for GoPro. However, the trick will be in convincing existing GoPro users to upgrade to newer cameras and equipment. Perhaps the company's new awards initiative will help convince consumers that in order to capture the most compelling content, they need the latest, most advanced GoPro gear.
With a growing library of some of the most compelling user-generated content ever created, GoPro is well positioned to dominate the streaming revolution. Digital media is more important than ever these days. Teenagers now spend more time consuming digital media (about nine hours per day) than they do sleeping, according to a new study by Common Sense Media. It's not surprising then that GoPro is focusing a vast amount of its resources today on growing its entertainment foothold.
GoPro Entertainment is the segment of the camera maker's business that streams user-generated content through a variety of digital channels including Google's YouTube. GoPro's channel on YouTube surpassed one billion views for the first time last month, making it one of only four global brands to achieve that milestone in YouTube history.
New software releases that make it easier for GoPro users to edit and share their content are also playing into the company's entertainment ambitions. Using GoPro's development software and studio desktop app, its customers are now exporting an average of 50,000 videos per day. Heading into 2016, the company plans to ramp its spending related to its software and entertainment initiatives -- a move that should further solidify its place as a budding entertainment giant.
Licensing content to ad agencies
Selling its user-generated content to professionals and ad agencies should create additional revenue streams for the company outside of its core business of selling hardware. The company launched GoPro Licensing as a tool for ad agencies and creative professionals to search for and license engaging GoPro content for commercial purposes. If GoPro Awards is as successful as the company anticipates it will be, it could drive significant growth in its licensing business as well.
The bottom line is that GoPro is in the early stages of transforming its business into a media empire. Investors should therefore spend less time worrying over near-term results and instead take a big picture view of this innovative growth company.
Tamara Rutter has no position in any stocks mentioned. The Motley Fool owns shares of and recommends GoPro. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.