The demise of the Flip video camera reads like the opening of a great murder mystery—or at least a decent Law and Order episode. Someone (or in this case, something) has been killed, there are a few suspects, but very few clues.
Or, more accurately, we know who done it: Cisco Systems Inc., the Silicon Valley networking gear giant that set its sights on the consumer video market and forked over $590 million to acquire Pure Digital Inc., the inventor of the Flip, in 2009. What we don't have, and what very few people appear to have even sound theories on, is motive.
Clearly, Cisco wanted out of a consumer business that it never really understood and that offered pitiful margins compared with Cisco's big ticket networking gear. (As evidence, several analysts cite the flop of Cisco's Umi video conferencing devices, which carried a price tag—$600 plus $25 per month for service—that many felt was untenable.) But the company's decision to pull the plug on the Flip business—rather than sell it off—has many people scratching their heads.
The Flip, which first hit the market under that name in 2007, is currently the No. 1 selling camcorder on Amazon.com—the black Flip UltraHD, that is. A total of four Flip models are among the top 10 selling camcorders on Amazon. According to the New York Times, a total of 7 million Flip camcorders have been sold to date and Cisco itself claimed that Flip represented 35 percent of the camcorder market.
"At the end of the day, they were selling quite a few of these things," said Michael Gartenberg, an analyst at market research firm Gartner Inc.
But despite this impressive positioning, it's pretty clear that nobody would have paid Cisco anywhere near $590 million to acquire the Flip business—and here is where our chief suspect, smartphone convergence, comes in. The market for camcorders, especially small, mobile camcorders like the Flip, is on the wane. In fact, according to market research firm IHS iSuppli, overall camcorder shipments have been relatively stagnant since at least 2003—the firm projects that in 2012 about 17.2 million camcorders will ship worldwide, compared to about 17.3 million in 2003.
Analysts have long warned that gadgets that specialize in one thing would be threatened by the convergence of devices that can do several things. Smartphones are the biggest thug, growing enormously in popularity and—in a competition for marketshare among each other—rapidly adding new functionality. The fact of the matter is that nearly everyone who packs a smartphone today—and even more so a year or two from now—is already lugging around a pocket-sized device that shoots video of comparable or better quality than the Flip.
Even so, someone would have paid something for the Flip business, which would have included a market-leading product, a lauded brand and a creative team of designers who shocked the world once and, who knows, could do it again.