They never saw the market. They didn't even know it existed.

Woodman is a surfer—the market was right in front of him. He saw a need, and he solved it with a very simple, high quality device tailored to that specific need.

A better argument there has never been for solving real problems with real solutions, rather than trying to essentially trick people into believing they both have a problem and need a solution. The latter is possible, but the former is a far better path to success.

The funny thing is that Canon, in particular, pretty much stumbled into pro/prosumer video and has done very well with it. Whether it causes itself harm by starting to try to deliberately segment its video and stills/prosumer video market remains to be seen.

But, yeah, they weren't aiming for the sports video market and they don't especially have a brand there. Actually, neither Nikon nor Canon have an especial brand in even waterproof cameras. (Canon does have one--only recently updated--Nikon AFAIK does not.) The point about getting out of bed in the morning is probably relevant. You get to a certain size of company and even large niches aren't especially interesting.

They never took it seriously to begin with, and now that its clear that this is a serious market, they're too late. I wouldn't put it past them to invest additionally in GoPro (or some competitor).

Separately - who are GoPro's competitors?

It would require a serious investment to make a camera that would exceed GoPro in terms of quality and reliability, and then even more investment in marketing to get some sort of consumer mindshare. All of this for a market that is something like 5-10% of their point and shoot market. It's the type of gamble most companies aren't willing to make.