What's going on with GoPro?

With layoffs and lower revenues ahead, GoPro needs something new. And it might not be far off.

When you think of DIY action footage these days, GoPro is probably the first company that comes to mind. (#Branding!) And yet, it's also in serious trouble: GoPro just announced that it'll be laying off 7 percent of its workforce, and it also lowered its revenue projections due to "slower than expected" sales over the holiday quarter. Both are pretty surprising announcements coming from the company that pioneered the idea of tiny action cameras and held over 70 percent of that market last year. So what's going on? Plenty of things, it turns out.

GoPro's biggest issue is actually fairly simple: It didn't have a flagship device last year that would entice even its most hardcore fans. The company released the $300 Hero+ LCD, a slight revamp of its entry-level model with a screen, and the $400 Hero4 Session, which was remarkably small but lacked features from the existing Hero4 Silver, at the same price. GoPro ended up slashing the Hero4 Session's price in half, to $200, last December, but that might have been too late for holiday shoppers to notice.

This year, at least, should be different for GoPro. The company is expected to release its long-awaited Hero5 camera, which should include things like 4K recording at 60 fps and better image stabilization. And we might finally see a GoPro camera reach the $100 mark—its current entry-level Hero camera retails for $130, but a cheaper model would make it even more appealing to mainstream consumers.

As technically impressive as GoPro's cameras are, they're still not for everyone. Look at the plethora of action camera footage on YouTube and you'll notice they mainly feature athletic people being awesome. Some are also attaching them to drones or using them in tight spots for experimental filmmaking. Action cameras simply aren't as compelling to the rest of us normal humans. After all, we can record our (far less exciting) life events with our smartphones, which typically feature better cameras anyway. There are also plenty of mounts and cases that let you use your smartphone to record video in all sorts of ways—on your bike, underwater and even on helmets.

While the research firm IDC predicts the action camera market will be worth around $2.9 billion by 2018, the smartphone market hit around $400 billion last year, according to GfK. It's a reminder of just how aggressively niche action cameras are. GoPro and its ilk are bound to plateau at some point, and we might be seeing the beginnings of that now. The company's stock has been hurting since last fall, and it fell another 25 percent following yesterday's announcement. At the time of this post, GoPro's stock sits at $12.19, about half what it was when the company went public in 2014. It's hard to imagine that its stock was floating over $90 at one point.

Still, there are a few obvious paths ahead for GoPro: virtual reality and drones. It's already unveiled Odyssey, a crazy $15,000 rig for Google's Jump VR platform, which is made up of 16 Hero4 Black cameras. It's a bit unwieldy, but few companies have GoPro's experience in building portable, high-quality cameras. The best GoPro videos today already achieve a decent amount of "presence"—VR lingo for describing how the technology makes you experience things virtually—so it's not hard to imagine how GoPro's technology could help VR. And we're also expecting GoPro's first drone, the Karma, early this year.

GoPro isn't just about cameras, either. The company has also been building a media empire with the best videos from its users (which typically end up being widely shared across the web). After launching its own channel on Virgin America flights a few years ago, GoPro followed up with apps for the Xbox One, Xbox 360 and Playstation 3/4. You can expect the company to push its drone and VR footage in similar ways.

I wouldn't be surprised to see GoPro eventually develop a single, 360-degree camera that lets anyone shoot VR-ready video—think of a portable version of Lytro's Immerge. Attach that to a drone and you've got an easy way to record just about anything. In many ways, it would be the culmination of everything GoPro has been working toward over the years. And perhaps most important, it's something that smartphones won't be able to steal away from GoPro.