GoPro – Instant Karma, Bad Karma or Good Karma
GoPro announced their new Karma Drone in September with the official date of release being Oct 23, 2016. As usual in the tech world, this launch was followed by crosstalk of every kind – some extolling the virtues of Karma and some negating them. The fuller story of GoPro and Consumer Drones, along with our projections, guesses and opinions, is set forth below for your interest. Note that Droneflyers is not moved by hype, screaming, false claims, marketing or other chest-beating – rather we delve into known facts, reports, opinions and precedent (history) to try and present a view based on our demanding master – The Market (Reality).
History of GoPro and their Karma Drone
Late to the Party?
GoPro has been making lightweight and rugged action digital cameras since 2006 so it made perfect sense when early R/C (radio controlled”) pilots installed them on their models. These early adopters flew either winged planes or helicopters as those models preceded the multirotor (3 or more propeller) machines we now label as “drones”. By the end of 2010, 100’s of hobbyists were building DIY Multirotors and strapping on GoPro cameras for a view from above.
2010 also saw the release of the first consumer drone, the Parrot AR Drone. The camera on this model was quite poor and so enterprising hobbyists strapped on a GoPro for a step up in image quality. By the end of 2011, various drones were available in kit form – the most popular being the DJI Flamewheel. Once again, GoPro became the camera of choice to strap on.
Despite these early signs, GoPro appears not to have noticed the growing market until 2013 with the release of the DJI Phantom 1 (see this article for more). The Phantom 1 was sold as “for GoPro” and supplied with a small plastic mount which a GoPro fit into. It wasn’t long before DJI introduced a gimbal to stabilize the camera and then, less than a year afterwards, a more powerful and capable Phantom 2 – once again designed specifically for GoPro.
It makes sense that, at this point, GoPro couldn’t help but notice that their camera was the #1 choice of the budding drone market. Yet they still did not provide backup such as improved remote control interfaces, etc. which may have given them a better lock on sales. It was at about this time that, based on reported facts, we can speculate that GoPro became interested in drones – to a large extent due to one Colin Guinn, the N. American marketer for DJI. Colin, unlike GoPro, noticed the synergy and therefore tried to convince both GoPro and DJI that a romance might be beneficial to both. The story goes like this – Guinn, without the full blessing of DJI, entered into discussions with GoPro to become an exclusive provider of Cameras for their drone – AND, for DJI to build a drone for GoPro also. As real negotiations got underway, DJI was presented with an offer from GoPro. GoPro wanted 2/3 of the profits from such a venture while leaving DJI with the remaining 1/3. DJI considered this an insult as they believed their aircraft and R&D was bringing much more to the table than GoPro’s cameras. Talks were ended without an agreement, however this event was truly the watershed moment for the entire consumer drone industry because it prompted DJI to make a fateful decision – to spend the time and money needed to develop their own cameras. A lesser known consequence was that GoPro decided, probably at the same moment, to enter the drone business.
Strike One, Strike two…..
Based on the above, GoPro’s first attempt to enter the business was a DJI built drone with the GoPro camera and label on it. When this failed, GoPro probably weighed their options carefully – but, all of a sudden, a new and uncharted path to their potential Drone Kingdom emerged…in the form of the same Colin Guinn who had brought them together with DJI. Colin left (an unfriendly parting) DJI in 2014 and immediately joined 3D Robotics (3DR), a DIY parts supplier with visions of becoming something more. Colin and 3DR envisioned becoming THE world leader in consumer drones and raised 100 million dollars in venture capital to fund the effort. The entire story can be be read at this link and by following the other links within. The short and sweet of it is that 3DR based their drone domination on GoPro and failed. But there is more to the story…
According to some reports, the 3DR partnership with GoPro contained a number of possibilities. Firstly, GoPro agreed to help 3DR in terms of the drone interface for their camera – this would allow full control of the camera from the ground, which is the holy grail of consumer drone photography and video. But the other, and rarely reported, aspect of this partnership was that 3DR was slated to either build – or provide massive hardware support – to GoPro’s future drone. If so, this represents the 2nd attempt for GoPro to “farm out” most of the R&D for their upcoming drone. When 3DR’s failings became obvious – approx. beginning of 2015 – GoPro cut off their support of 3DR (API’s and other info) as well as their potential partnership in manufacturing. This left GoPro quite far behind in terms of their drone development process. They would effectively have to start from scratch as of mid-2015.
Putting this into a basic timeline, GoPro informed analysts near the end of 2014 that their drone would be hitting the market in late 2015. Now, almost a year later, the Karma is just being introduced and certain models of it (example – with the Session) are delayed until Spring 2017. Given that the leader in the consumer drone industry now has a development cycle of less than one year, this wasted time could be difficult to make up.
One Flight Controller (OS) to Rule them All
Underlying much of this drama is a technical foundation not understood by the public, the analysts and perhaps even the manufacturers themselves. This can be summed up in three words “Drones are Hard”, however here is some additional detail. A company like GoPro does not have the resources to develop their own drone “operating system”. In the case of these flying robots, that system consists of both software and hardware called the “Flight Controller”. This is why GoPro first tried partnerships with DJI and 3DR. DJI has developed and honed their flight controller over many years and it is proprietary. 3DR, and now GoPro (and others) rely on various “open source” projects started by hobbyists – specially the Ardupilot project and the newer offshoot “PX4” which GoPro reportedly is using. But herein lies the rub – these systems may not be fully mature and capable of the extended functions that consumer drones now have. Companies using them must build upon them to achieve additional functionality. Also, users are somewhat tied into decisions made by others in terms of the larger issues of exactly how a flight controller should work.
We are not talking about Android or Linux or other projects where millions of programmer hours have been expended in testing all aspects of the system. Rather the original project was a doctoral thesis at a Swiss Technical Institute and the PX4 remains similar. Here is the web site of the PX 4 project.
To summarize this section, the lack of advanced features on the Karma Drone are probably due to those not yet being implemented on the Flight Controller that GoPro relies upon.
The Drone Project Leader and CEO at GoPro
GoPro poached a former 3D Robotics employee named Pablo Lema to lead their drone development program. Pablo’s work history seems to consist mainly of sales – we can find no record of his involvement in engineering and complex product development. During his time at 3DR, their first “non-kit” drone models (Iris and Iris+) were introduced, neither of which sold in any quantity. With less than a year of 3DR employment and no engineering background, it is interesting that GoPro hired and appointed him as Senior Product Manager for their upcoming Aerial Robotics division.
Note: this is not intended as a critique of Mr. Lema who seems an intelligent and capable individual, but to reference back to the original point of “Drones are Hard”. It would seem such projects should be headed by senior engineers capable of this amazingly complex task.
The Last Delay
The buck has to stop somewhere and there is no excuse for the debacle presented by the original launch date of Karma – June 8, 2016. This date was announced and marketing was arranged by various ad agencies. Then – less than 3 weeks before the promised date – the launch was canceled with the claim of “Karma is delayed until the 2016 Holiday Season”. To say this is/was a massive blunder is an understatement – a launch date such as given would have meant that the product was already being manufactured – after all, it takes weeks for it to get made, shipped and distributed. Yet something must have been very wrong for the entire effort to be frozen in place!
Blame can only be assigned to the CEO, Nick Woodman, who according to various reports is often missing in action (at HQ) and maintains a culture some describe as “a bro-fest”. Leadership matters – and having the CEO of a poorly performing company (they have lost 8 billion in market cap) gallivanting around in a private jet and placing an order for a 180 foot yacht does not provide good optics in the world of “lean” startups and innovation. By contrast, the CEO of DJI is known to work 70+ hour weeks and keeps a bed in his office. Perhaps Nick is not hungry enough – and, if so, maybe he should assign leadership of the company to executives who are.
Note: The above is the author’s opinion based on decades of study in the field of innovation. As an example, when I first read that Jeff Bezos (Amazon.com) was giving new employees desks made of old doors on sawhorses, I knew the venture had a good chance of success.
Reliance on Outside Technology and Manufacturing
GoPro does not manufacture their own cameras – or drones, instead using contract manufacturers such as Jabil Circuits who run plants throughout China. This is fairly common in the tech industry, however competitors in Drones such as Yuneec and DJI own and operate their own factories. As discussed above, GoPro also relies on outside technology for their flight controller. With shorter and shorter “design to production” product cycles, these relationships could result in longer development and upgrade timelines for the Karma.
Our Initial Projections and/or Cautions
This article is being written in late October, 2016 – after the promised launch date of the Karma drone. As of this time, Karma is not available in many of the configurations – even on a backorder basis. GoPro is claiming Nov. 28 as a ship date on their own site, while many others (BestBuy seems the first in line retailer) are showing certain configurations available soon or mid- November.
Models using the Session (smaller) GoPro Camera have been delayed until Spring, 2016.
Based on the late and slow start it would seem difficult for sell through (actual consumer purchases) to meet even the most conservative of the targets. Wall Street’s sales target for the fourth quarter translates to sales of about 850,000 stand-alone Karmas – a virtual impossibility. If GoPro manages to sell even 250K Karmas in 2016, they will have done well in terms of cracking into the Drone market. Alas, figures of 1/3 the projections may not keep Wall Street happy. Sell through of 250K units would result in an increase in revenue to GoPro of approx. 130 million dollars – too little to move the needle much for a company that has had a market cap of between 2 and 10 billion dollars over the past 2 years. The costs in R&D, marketing and customer service for these increased revenues are also likely to be high, although many of those may be tempered with additional sales and word of mouth in 2017.
It is likely that GoPro will sell most every Karma they can make and/or deliver in the holiday season – the big question, therefore, becomes how quickly they can move.
But are they Perfect?
Gone are the days when drone consumers would put up with massive defect or shortcomings in software and hardware. Earlier models (prior to 2013) were expect to crash and misbehave…to the extent that it was a running joke among hobbyists. However, the introduction of the first DJI Phantom changed expectations – and, if anything, that reliability has now been improved upon.
The point here is that the GoPro model has to be almost perfect on initial release – in a market where no manufacturer has ever done thing before. Others learned from earlier models and slowly modified the programming and hardware to improve on known shortcomings. While GoPro has the advantage of learning from others mistakes, it is still a major accomplishment to get things right the first time (Again, Drones are Hard).
The QC (Quality Control) issue can play out in 3 ways. Ideally, they have worked so long and so hard on this…that the initial release will be ready for consumers. Less ideal, but acceptable, would be some smaller firmware and software (programming) problems which do not cause major incidents (crashes and loss) and can be fixed with updates. The third, and most worrying, case is one where there are more serious defects in the hardware and/or software that cause incidents and are not easily fixed. These run the gamut from hardware or component/assembly failures to bugs in the firmware which cannot be replicated or easily fixed. Such event can cause incredible losses in customer service and warranty claims – again, one of the big differences that flying machines have with more terrestrial consumer electronics.
Even More Important – Our Longer Term Considerations
If GoPro is able to run the gauntlet and solve the 100’s of problems in drone development…and introduce a solid model…and supply it in bulk quickly, they will sell quite a few Karma. Given their brand recognition and worldwide distribution they could easily be the #2 or #3 Consumer drone company, which would result in sales of up to 400K units in the next 6 months. However, this – in some ways – is when their problems start!
Firstly, we have the inflated projections of Wall Street – calling for up to an impossible 6 million units in the first year. There is no case where even 20% of this number could be sold.
But, more importantly, there is the question of “what is next?”. Having already burned through a couple extra years in their development and production of a Drone, they cannot get a long term boost from a single, and perhaps dated, model. This means their next model – or models – would have to already be well into development NOW if GoPro was to be considered a serious and ongoing drone company.
Our opinion is that sales over the next 4-5 months are a given and that the true tale of GoPro as a drone competitor will be told in Spring, 2017. At that point consumers will have the choice of a number of mid-level drones – all of which will already be in the hands of reviewers, critics and fellow pilots. The initial holiday season and “first in line” buyers will have been sated and the Karma drone will have to sink or swim on it’s own. In addition, there is the surety of the Elephant in the Room – DJI. If Karma sells 400K units, DJI will look at that as sales “stolen” from them – despite DJI’s own likely doubling of revenues over this holiday season. Those outside of this industry often lack understanding of DJI and the lengths they will go to in order to dominate the market. Many insiders, including ourselves, have labeled them “paranoid” and this is probably an understatement. Given the history of this market – no maker, even Yuneec backed by Intel money or 3DR backed by Qualcomm and other investors, has been able to get more than 6% of camera drone sales – we cannot even speculate as to how DJI is going to react to potential high Karma sales. As an example, they may decide to release a mid-level version of their new Mavic drone…at $499. At 1/2 the size and weight of a Karma..and with vastly more capabilities – this would be a warning shot across the bow of GoPro.
Back to Sports and Action Cameras
GoPro is being assaulted from ALL sides within their main product category. Even DJI, primarily a drone maker, has now found success with their line of Osmo handheld cameras and camera mounts. Dozens of other companies, from Nikon to Sony to Garmin, are releasing action and sports cameras…all into a market that is not growing quickly!
This impacts GoPros ability to spend R&D and marketing money on their drone biz – both now and in the future. They are effectively surrounded – but still alive.
Why the “Media” Strategy has no Value.
This should need no further explantion. Study it. GoPro’s youtube channel gets fewer views than that of a single Vblogger like Casey Neistat. Millions of consumers are not going to learn GoPros editing software and use their cloud…and/or pay $5 a month. It won’t happen. IMHO, it is a sales pitch and/or empty promise. If GoPro management truly believes in this theory, their stock just diminished further in my eyes (and they should hire me as a consultant to tell them these things!).
Our Summary and Opinion
It’s hard to see a scenario where GoPro succeeds and meets the lofty goals of their Wall Street Masters. Having attained a market value (2015) of 10 billion dollars, investors expect a run back up toward such numbers. Although not impossible, this would seem a very unlikely bet.
GoPro would have made a nice family business. However, the IPO and sky-high expectations changed the game plan. At this point our opinion is that the company will eventually sell to another entity – perhaps Red Bull or other action sports company, or even a Chinese entity which desires a foothold with a major brand name. Depending on the exact situation at the time of sale, GoPro is likely to fetch somewhere between 1 and 2 billion dollars – roughly the market cap as of today in the most optimistic example.
Note: I am neither long or short GoPro stock and have no financial interest in any drone or drone related company other than this web site. My opinion are mine alone.
The Karma Drone
The above is not commentary on the utility or the quality of the GoPro Karma Drone. Production and review models are not yet available. The package certainly looks nice and would make a good land/sea/air combo for the existing GoPro fan or future GoPro customer. We will follow along with user experiences and perhaps review one ourselves once the initial dust settle – at that point we will publish separate articles on the Karma.