GoPro has closed up shop on its drone business, clearing out its inventory of Karma drones and laying off 250 employees.
The Karma has been troubled from the beginning. Following its first launch in October of 2016, about 2,500 Karmas had to be recalled after reports of them losing control and falling out of the sky.
During that debacle, not only did GoPro lose a lot of face and consumer confidence, they also offered all of those who’d bought the faulty Karma a free camera for their trouble. This was generous, but meant yet more losses for the company—in 2016, the company reported losing $373 million.
An improved version of the Karma began to ship in early 2017, but GoPro had an even bigger hill to climb than before, since they now had to convince consumers their drone was glitch-free (not to mention mounting market pressure from competitor DJI).
A list of items from a recent press release issued by GoPro sums up the huge change now taking place at the company:
- GoPro is reducing its global workforce from 1,254 employees to fewer than 1,000 employees worldwide.
- GoPro founder and CEO Nicholas Woodman will reduce his 2018 cash compensation to $1.
- Although Karma reached the #2 market position in its price band in 2017, the product faces margin challenges in an extremely competitive aerial market.
$1—yikes! The salary reduction for GoPro’s CEO is especially noteworthy since Woodman was the highest paid CEO in America in 2014.
According to buzz in the industry, much of the blame for GoPro’s overall decline can be laid at Woodman’s feet. As one insider put it recently, “He botched the Karma, he botched the Session, he botched the Hero6, and he botched VR.”
GoPro claims that it will save $80 million in 2017 through this “reduction in operating expenses” (i.e., getting rid of their drone division), but there are sure to be hidden costs to firing 1/5 of their workforce and radically restructuring the company.
The move to cut the Karma comes at the end of the worst holiday season in terms of sales that GoPro has seen since they went public in 2014. At the beginning of the holiday season the Hero5 wasn’t selling as expected, so GoPro cut its price in the hopes that this would help it sell better.
They’ve since done the same thing with the Hero6, reducing the price from $499 to $399, indicating a downward trend not just for the Karma, but for the company as a whole.
But this news about the Karma shouldn’t be all that surprising—after all, we saw big waves of layoffs throughout the drone industry back in March, with GoPro on the list of companies laying people off (as well as Autel, 3DR, Parrot, and Yuneec).
When it comes to the consumer market, DJI pretty much has it cornered, which is why we’re seeing those drone companies that want to stay competitive shifting to focus on drones for niche applications—just look at Parrot’s new prosumer line, or Yuneec’s H920 Plus for commercial applications.
GoPro may have lost to DJI, but the fight with DJI isn’t completely over. Just today Yuneec launched two new drones for relatively niche sectors in the consumer space—a racer drone and a fixed wing drone. We’ll be curious to see how they do over the next few months, and whether they can elbow out a space for themselves under the looming shadow of DJI.