We can’t all make it to the gym and as the home workout market grows, the high end products keep getting more exciting. Now, enter Peloton. The at-home-studio workout brought the gym subscription to people’s home and Peloton out cycled the competition.
Peloton was started by John Foley with the concept coming to him in late 2011. The initial idea came from him noticing that the athletes at the studio classes didn’t care about the hardware as it was more about their instructors and the music.
This gave Foley the idea to bring the studio to the living room for those who didn’t have time to go to the gym.
Foley, who attended Harvard Business School in his first round of investment raised $350,000 from a dozen Angel Investors from his extensive network. He then added another $50,000 of his own money and then got to work on Peloton.
Peloton’s cycles are linked to streams of workout and some are workout videos that can be followed along as if you were taking part in a studio cycle session. Peloton describes itself as a tech company, a media company, a software company, a product design company, a retail company, an apparel company, and a social connection company that enables the community to support one another.
Peloton’s target audience are ‘the money suburbanites of the world’.
Peloton disclosed overall sales of 577,000 machines and 1.4 million members. Of the total members, 511,000 pay a subscription fee of $39 a month and another 102,000 members pay $12.99 a month. The large volume of customers Peloton has attracted show that an audience clearly exists even at its more expensive price point. The bike is Peloton’s flagship product and is among the most highly rated at home pieces of gym equipment on the market. It’s a stationary bike with a large touchscreen attached. It runs a custom version of Android that only lets you view live or on demand cycling classes.
There are thousands of video sessions available for members including shortcuts for those with limited time. There’s an abundance of music as well as over 20 fitness instructors to choose from. There are social features including virtual rides with friends, leader boards and achievements. The bike which is manufactured specifically by Peloton has a sleek frame plus an exclusively designed sweat proof monitor starting from $2,245. The bike isn’t Peloton’s only product with Peloton offering a treadmill from $4,295 and the peloton app. The app lets you track your workouts, watch live streams, and acts almost as a portable version of the screen.
Rumour has it Peloton are currently working on a rowing machine which is meant to be revealed in 2020.
Peloton went public in 2019 with their IPO price at $29 per share. However, their offering wasn’t quite as positive as hoped with the price opening the next day at $27 and dropping to as low as $25.76. 11% lower than the initial price. However, Peloton still managed to raise $1.16 billion through this offering. This gave the company a valuation of around $8 billion. Fundraising hasn’t always been without its hick-ups though.
Peloton had to find some way to help their premium customers keep wanting to pay a premium price tag. In order to tackle this, they used their program to mix celebrity with fitness and did this by spotting the sorts of celebrities that their target market (the wealthy cycling enthusiast) would know. Peloton has world renowned road racers such as Christian Vande Velde and George Hingapie. They’ve also stolen stars of the indoor cycling world from their competitors such as Robin Arzon, Nicole Meline and Jenn Sherman. These celebs have social media followings that has boosted the Peloton brand.
Peloton is without doubt an innovative, exciting and successful venture. But there’s always a but.
Firstly, Peloton put a lot of emphasis on its wide variety of music and its ability to pump out music through its own high quality sound system. This was to create the studio feeling and get the rider really engrossed in the workout. Unfortunately, most people either have a good sound system or Spotify or Apple Music and have their own playlists for the gym. The customer has what they need from a music perspective and they’re not paying the Peloton membership fee for the music.
What people forget about is that music costs a fortune and Peloton faces many issues with paying for rights to the songs it plays for users and disclosed total costs for licensing music over a three year period of $50.6 million. On top of this, as of 2018 the company have racked up more than $500 million in losses since its formation in 2012 even though revenue rocketed up to more than $900 million that year. Peloton has had issues with their accounting, which they’ve claimed that they don’t have a good handle on.
Despite all this, there was one major hitch in 2019 when the Christmas Peloton advert was heavily criticized for being old fashioned and sexist resulting in the company’s share price to drop by $1.5. billion.
What can be learned courtesy of Peloton?
Well, sometimes if there’s a problem you just got to push through it yourself. If there’s no product that fits what you need…invent it yourself. If your goal is to become one of the top companies in the world then an IPO may be a great way to boost publicity and fans. Finally, the idea of using famous faces can work for any sized business whether using influencers or celebrities and getting endorsements for your business adds another level to your marketability.
And that is the Peloton way…that is their story.