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Apr 13, 2011- Flip no more...

In 2005 digital videos camcorders were bulk and complicated to use. So it was not surprising that when Pure Digital introduced its single-use digital camcorder to the market, it made a huge splash. The one-time-use camcorder was branded and sold through the CVS chain. The "problem" was that the camera was too good. Users purchased the inexpensive cameras and kept them instead of returning it to CVS for processing, killing the original business plan. The relationship with CVS ended, but Pure Digital gained an extremely valuable insight (something they could have learned by reading Clayton Christensen's Innovator's Dilemma) regarding consumer's willingness to trade quality for low cost and ease-of-use.

Pure Digital revamped and spent the next few years selling directly to consumers, building the brand, and creating a $400 million dollar business. In 2009, they cashed out and sold the company to Cisco Systems for $590 million. This story would have had a fairy tale ending if it wasn't for the bombshell announcement yesterday from Cisco that they would be cancelling the Flip division and laying off over 500 workers. The announcement was surprising because Flip has over 25% of market share for low-end camcorders and a loyal user base. Apple has made do with much less for decades. Of course, Cisco is a $40 billion dollar company and a division which "only" generates $400 million in sales can actually be a drag on the bottom line.

Still, looking at the trajectory of where digital video is heading, it seems that a special purpose device which only does video may not be long for the multi-use device world. Cell phones, iPods, and DSLRs can all take high-quality videos today. Even the new iPad has a video camera built into the back. Software such as iMovie has made it drag-n-drop easy to edit the clips. YouTube and others hosting sites made sharing the clips simple and quick. Shooting, editing, and sharing videos today is as easy as making a phone call.

Will there still be room for an inexpensive digital video camcorder in that kind of world? Think about the following before you answer: are you willing to hand over any of your multi-use devices to a six-year old and let him/her run around shooting videos of the dog/cat?

According to Cisco, the decision to kill the Flip was done so that the company could refocus on its core business. They may be right. Cisco makes awesome routers and networking gear, but nobody associates them with consumer electronics. If they really want to be a player in the consumer market perhaps they should focus their energies in making it easy to connect up everything in our home. Cisco gave us a glimpse of how easy setting up WiFi could be with the Valet. Now, if Cisco could help us set up a "smart home" with voice command capabilities, video surveillance, and all the other cool stuff that has been "just around the corner" for decades, they could really make an impact...both in the consumer market and to their bottom line. [Permalink] - Flip no more


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