The Biggest Police Body Cam Company Is Buying Its Main Competitor

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(Bloomberg) -- Axon Enterprise Inc., the police technology company best known for its Taser stun guns, agreed to purchase its main competitor in the body camera industry, Vievu LLC. The combination of the two largest providers of the recording devices will create a dominant force in police surveillance. The companies declined to disclose financial details; Axon said it would discuss them in its quarterly earnings call on Tuesday.

Body cameras and related software services account for just over 30 percent of Axon’s revenue, but the company expects the business to surpass Taser in the next few years. Body cameras have spread rapidly across the U.S., a response to pressure from critics of police departments and many of their backers. Their use remains controversial, largely around surveillance risks and the still-evolving landscape of rules governing their use. Axon was already in a central role to help shape the way the technology is used. That will be even more true after the Vievu acquisition.

The deal caps a long and contentious relationship between the two companies. Before starting Vievu in 2007, Steve Ward worked at Axon, then known as Taser. His former employer sued him, alleging he stole trade secrets. The case was eventually settled. With Axon apparently reaching the limits of growth for its Taser business, it turned to body cameras, and the two companies entered a city-by-city race to sign up police forces. Axon shares gained as much as 6 percent on Friday after the deal was announced. 

Safariland LLC, a company whose primary business is body armor, bought Vievu in 2015. The intention was to compete with Taser in the burgeoning market for body cameras, which was heating up in an atmosphere where concern over police misconduct had spiked due to a series of high-profile deaths. Vievu’s cameras were superior to Taser’s in certain ways—they were better at recording audio, for one thing—but Axon leveraged its credibility with police departments to achieve a huge head start.

While most contracts were awarded without competitive bidding, Vievu and Axon sparred bitterly over the few that were. The companies sued one another over a contract in Phoenix, which Axon eventually won. When Vievu won a bid to provide cameras to the New York Police Department, by far the nation’s largest, Axon criticized the process, then offered to give the department 1,000 cameras for free. Vievu called the move “desperate” and “at best unethical and at worst illegal.”

Over time, it became clear that the most vital part of providing police body cameras was not the devices but the software. Axon said it spent $100 million building a system to manage massive amounts of footage and has been working on software that will help departments redact personal information from videos. Eventually, said Axon Chief Executive Officer Rick Smith, the company plans to offer automatic footage assessments, which could tag portions that require human review.

Axon’s ambitions for software services has raised hackles among civil rights activists. Last month, a coalition of civil rights groups wrote to the company to express concern that body cameras were becoming tools of surveillance. “Axon has a responsibility to ensure that its present and future products, including AI-based products, don’t drive unfair or unethical outcomes or amplify racial inequities in policing,” they wrote. It singled out software that adds real-time facial recognition to body cameras as “categorically unethical” and asked Axon to include members of communities who have suffered from police abuse to an artificial intelligence ethics board the company has established. 

As Axon was diving deeper into software services, Safariland decided it wasn’t worth the investment needed to keep pace. “We achieved some reasonable amount of success but said, you know, ‘Who am I, and what do I want to be when I grow up?’” said Gray Hudkins, Safariland’s executive vice president for corporate development. In early March, he contacted Axon to explore a sale. For Safariland, a major sweetener in the deal was Axon’s agreement to a decade-long period where Safariland will be the preferred provider of holsters for Taser weapons.

Axon will now get the New York contract it wanted so badly in 2016, as well as four other key contracts. There are 69 major police departments in the U.S., according to Axon. After the acquisition, Axon said it will have 43 of the 54 contracts that have been awarded so far. The remaining competition is split between smaller players.

Even more than in Tasers, Axon’s strength in the body camera market is self-perpetuating, said Smith. Police will want to share evidence for collaborative investigations, and each additional client adds relatively small costs once the system is built, he said: “The vast majority of agencies are selecting our platform, and not because of the cameras.”

This dynamic could raise questions about whether a single company should control such a sensitive market. Smith argues Axon isn’t competing with body cameras but with other surveillance and public safety tools. Smith said he’s “highly confident” that the deal will pass regulatory review.

©2018 Bloomberg L.P.

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