GoPro currently dominates over 90% of the action camera market. But looking ahead, many investors are concerned that cheaper devices will chip away at the company's market share and force it to lower prices. Those fears were partially confirmed when GoPro launched its $129 entry level HERO in the fall. In a previous article, I discussed the pros and cons of GoPro entering the low-end market.
Today, we'll take a look at the high-end market, home of GoPro's HERO4 Black. The Black model launched in late September as GoPro's first 4K camera. However, it wasn'tthe first 4K action cam on the market --Panasonic beat it to the punch in March with the HX-A500.
GoPro's HERO4 Black (L) and Panasonic's HX-A500 (R). Source: Company websites.
Let's take a look at the playing field in the high-end 4K action cam market and determine if investors should worry about Panasonic stealing GoPro's thunder.
The business of 4K devicesThe market for 4K video, which has four times the resolution of traditional HD video, is still a small one. NPD DisplaySearch forecasts that of the 229 million televisions that will ship globally this year, only 12.7 million will be 4K televisions. Many streaming video services -- including YouTube, Netflix, and Amazon.com -- recently added support for 4K videos, but they look the same on 1080p TVs and monitors.
4K videos have huge file sizes. A nine minute 4K 30 fps video on GoPro requires 4GB of space, while a 1080p video would be a fourth that size. 4K videos fill up hard drives quickly and can be tough to edit on slower computers. That's a lot of trouble for a casual user who just wants to upload a video to YouTube or Facebook.
GoPro's HERO4 Black and Panasonic's HX-A500 clearly weren't meant for casual users -- they were designed for a niche market of hardcore action camera enthusiasts. For that group, the HERO4 Black tops the HX-A500 in most technical aspects, though customers can expect to pay a premium for that increased performance.
Source: Company and industry websites. *varies based on Wi-Fi usage and fps.
What 4K action cams mean for GoProGoPro's greatest strength is that it has become a noun for all action cameras, while competitors are often called "GoPro knockoffs" -- another reason GoPro now offers a wider range of casual to hardcore action cameras for its users.
Therefore, the $129 HERO shouldn't be considered a cannibalizing threat to GoPro's higher-end Silver and Black cameras. Instead, it should be considered a "gateway" action camera which could introduce casual consumers to the GoPro brand. If these customers enjoy using the HERO, they might upgrade to the Silver or Black versions down the road.
As for 4K videos, investors should remember that GoPro wants to expand and monetize its GoPro Network, which is currently hosted on YouTube, Facebook, Instagram, Pinterest, Microsoft's Xbox Channel, and Virgin America's in-flight videos.
Since 4K televisions will eventually catch up with traditional LCD televisions, and many media providers already support 4K videos, it's logical to encourage GoPro's users to share 4K videos of their own.
What 4K action cams mean for PanasonicFor Panasonic, cameras are only a small part of its AVC Networks business, which also sells TVs, projectors, in-flight entertainment systems, home audio equipment, and tablets. AVC Networks accounted for 19% of Panasonic's top line in fiscal 2014.
During the first six months of fiscal 2015, revenue at AVC Networks fell 3% year-over-year due to weak sales of plasma displays and digital cameras. Expanding into action cameras is presumably a strategy to offset declining digital camera sales, but it has been done before -- Sony, Canon, and Nikonadopted similar strategies with little success.
Sony's Action Cams. Source: Sony.
The problem is that digital camera makers are only dedicating a small percentage of their resources toward developing "GoPro rivals." As a result, the cameras look generic, and they are burdened with equally generic names like Sony's HDR-AS100V or Panasonic's HX-A500.
Why the HEROES will winGoPro initially built its reputation on high-end action cameras, and the company is continuing to upgrade its offerings with 4K-capable cameras like the HERO4 series.
Panasonic's HX-A500 is a notable challenger in the 4K market, but it lacks GoPro's brand appeal, design aesthetics, or massive video sharing network. At the time of this writing, Panasonic's Panasonic Imaging YouTube channel only had 661 subscribers, compared to GoPro's 2.53 million.
The media likes to label cameras like the HX-A500 as potential "GoPro killers." However, I doubt a real GoPro killer will arrive unless a challenger fully commits itself to developing a superior product -- in terms of branding, design, and a self-sustainable media network.
The article GoPro vs. Panasonic: Who Will Own the 4K Action Cam Market? originally appeared on Fool.com.
Leo Sun owns shares of Facebook. The Motley Fool recommends Amazon.com, Facebook, GoPro, and Netflix. The Motley Fool owns shares of Amazon.com, Facebook, Microsoft, and Netflix. 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.
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