Peloton, a major disruptor establishing a new paradigm or a flukey pandemic success?

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wco81

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  • #1
    Podcast covers the brief history of Peleton:

    https://slate.com/podcasts/thrilling-ta ... ic-success

    So the founder couldn't get startup funding because investors wouldn't believe that people would pay a huge upfront cost, some $2500, and then pay a subscription for a connected bike. He went to Kickstarter because he saw that people were paying $36 for each Soul Cycle session in some affluent cities without blinking an eye -- no doubt there are pockets of people who have money that they can literally burn.

    He figured people will line up to pay $40 a month instead, to watch cute trainers on a TV screen.

    By the end of 2019, Peloton had some traction but it would not explode until the pandemic. Now it's engendered fanatic loyalty and fandom, with various social media groups and such. Mention to some of them that paying several thousand and then paying $40 or whatever for a subscription is a scam and you will get loud denials.

    They interview a Wall Street analyst who's a fan himself. Says Peloton breaks even or so on the hardware but it's margins could be 65 or 70% because hiring those trainers and getting music rights are not that costly. They currently have about 2 million subscribers but have talked about getting 100 million eventually. The analyst said if they got to 30 million in 10-11 years they'd be doing great, assuming they keep those huge margins.


    So does Peloton expand it's subscriber base by that much? There are competitors for connected cardio machines but nothing comes close in terms of market share. However, it could be that the real competitor to Peloton would be the end of the pandemic, when people could go to gyms. Sure they may have online buddies in Peloton (does it have friends or favorites?) and their favorite trainer.

    But it sounds like Peloton users skew more male? In that case, it could be that a lot of men prefer to see women in person at the gym rather than the cute trainer on the screen.

    Also the potential subscriber base could be limited by the fact that in most parts of the country, you can get a gym membership for a lot less than $40 a month.
     
    Nevarre

    Nevarre

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  • #2
    Like a lot of luxury goods, "value" is not the primary driver of the purchase. It's all about the a) experience and b) being able to brag that you have a Peloton ;)

    The pandemic has helped drive sales, but they're only able to market to a limited segment of affluent buyers who were already interested in spending lots of money on fitness, probably at a more premium level. Large segments of the consumer base will just not pay $2500 up front + ~$500/year.

    As you say, some of those more premium buyers will be able to get out more and discontinue their subscriptions in favor of in-person fitness activities or even "nothing" because they'll have more entertainment options. The subscription model is really key here-- wealthy buyers might just pay that $40 for months with the 'well maybe I'll use it someday and I want it to be ready' mentality, just as gyms depend on over-selling capacity and making it hard to quit the gym. That's not a growth strategy but it is great for sustaining income.
     
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    wrylachlan

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  • #3
    They’re supremely vulnerable because they have no ‘moat’. There’s nothing about their business model that’s remotely difficult to copy. Other fitness hardware brands are building out their own services and others are developing hardware-agnostic services.

    Maybe most challenging is that they don’t have a toe-hold in bio-monitoring. The future of these services is going to be more than “your favorite instructor doing a class”. It’s going to be “your favorite instructor doing a class and giving you one on one personalized feedback based on how well you’re actually doing.” That will require bio-monitoring and it will require a programming team to create a sort of “choose your own adventure” based on how the individual is performing.

    What Peloton has is terrific brand recognition. It’s not clear that that will be enough to carve out a durable lead in a segment with such low barriers to entry for competitors.
     
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    wco81

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  • #4
    There must be some potential in this market if Apple is jumping in. But they're just dipping their toe in the water, with a relatively cheap subscription price, as part of their overall goal of increasing Services revenues.

    Not necessarily because they think there's some huge market for online exercise subscriptions.


    Someone pointed out that one reason Peloton is successful is that it's convenient and you don't have to schlep yourself to the gym. That's true, we know the jokes about how people buy gym memberships and never use them. But it's also true of home exercise equipment as well.

    It would be interesting to track Peloton usage over time, like when they first buy the equipment and say a year or two out. Or how usage tracks after the pandemic.

    You'd expect a surge of Peloton hardware sales around Christmas as well as new subscriptions into the New Year. But then actual usage tails off in the spring and the onset of warmer weather?


    Also it sounds like one reason for the success of Peloton is the leaderboard and other social media metrics or achievements. Fucking gamification of exercise.

    But don't you get more benefits from CV exercise with a certain BPM sustained for say an hour vs. people talking about how Peloton is convenient because they can get in a 15-30 minute session? But probably a short session at very high RPM and BPM?
     
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    wrylachlan

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  • #5
    If you’re doing a consistent 15-30 minutes daily at a decently high intensity that’s actually pretty good. I try to do a consistent 30 minutes on the treadmill at about a 7 minute mile every day except Sunday which is my long. That works out to around 25 miles a week just from my regular days and 10 or so more for my long. 35 miles a week at those speeds is nothing to sneeze at.

    Now if you’re talking a 30 minute workout every few days, or a 30 minute workout where you’re not really pushing yourself... that might not be enough. But a consistent 30 can get it done.
     
    cateye

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  • #6
    Also it sounds like one reason for the success of Peloton is the leaderboard and other social media metrics or achievements. Fucking gamification of exercise.
    Click to expand...
    You make that sounds like a bad thing. Most successful exercise movements or business ideas leverage game theory in one form or another. My wife is insane about Orange Theory, a HIIT gym chain that does exactly that, turns workout routines into games and challenges. But then again, she's an extrovert. My introverted ass prefers our at-home workout equipment, or our community rec center for when I want to swim or need access to something not practical for the home—free of distractions or anyone yelling "encouragement" at me. Go away.

    Peloton seems to be successful due to its exclusivity (both in terms of cost and in terms of how hard it is to get one of the damn bikes), its game-theory antics, and the mix of live and at-your-honor workouts. The handful of people I know who have them express the same sort of over-the-top adoration normally reserved for Apple products ( ;) ). Peloton's business plan may very well have its weaknesses, but the brand appears to have achieved some power.
     
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  • #10
    cateye said:
    You make that sounds like a bad thing.
    Click to expand...

    What could possibly be bad about a company gamifying something that I don't like doing to trick my mind into thinking that I do want to do it, in order primarily to enrich their shareholders?

    wco81 said:
    Or maybe they just didn't want to keep paying to be prodded on the hamster wheel by fit young women.
    Click to expand...

    Indeed, it becomes even more jarringly frustrating when they can only offer me a sham facsimile of that which I truly desire.
     
    cogwheel

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  • #11
    wco81 said:
    Saw a graphic, Peleton stock is down like 82% in the past year or maybe YTD this year.

    Guess the spin classes and instructors were not so addictive.

    I don't know if people quit because of price increases or they just get out more, do other things.


    Or maybe they just didn't want to keep paying to be prodded on the hamster wheel by fit young women.
    Click to expand...
    My understanding is that it isn't exactly that people are quitting (though they are), it's that Peloton made an incredibly stupid mistake by seeing the pandemic bump, assuming that level of demand would be the new normal, and scaling up quickly to meet that. Pandemic restrictions fade, people go back to getting their exercise in other ways, and Peloton is left with a horribly oversized amount of production and infrastructure for the clients that will stick with it (primarily the pre-pandemic base).
     
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    prc117f

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  • #12
    cogwheel said:
    wco81 said:
    Saw a graphic, Peleton stock is down like 82% in the past year or maybe YTD this year.

    Guess the spin classes and instructors were not so addictive.

    I don't know if people quit because of price increases or they just get out more, do other things.


    Or maybe they just didn't want to keep paying to be prodded on the hamster wheel by fit young women.
    Click to expand...
    My understanding is that it isn't exactly that people are quitting (though they are), it's that Peloton made an incredibly stupid mistake by seeing the pandemic bump, assuming that level of demand would be the new normal, and scaling up quickly to meet that. Pandemic restrictions fade, people go back to getting their exercise in other ways, and Peloton is left with a horribly oversized amount of production and infrastructure for the clients that will stick with it (primarily the pre-pandemic base).
    Click to expand...

    It was on purpose, shares dumped to bagholders, CEOs and insiders made bank and wealthier then ever. It was all a scam. They had to do all that to give people the illusion of success so they can collect bonuses and pump stock to dump bags. Only fools bought into this stock.
     
    ffifield

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  • #14
    wco81 said:
    Saw a graphic, Peleton stock is down like 82% in the past year or maybe YTD this year.

    Guess the spin classes and instructors were not so addictive.

    I don't know if people quit because of price increases or they just get out more, do other things.


    Or maybe they just didn't want to keep paying to be prodded on the hamster wheel by fit young women.
    Click to expand...
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    md5crypto

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  • #15
    ffifield said:
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    Why a moderation notice 6 months later?
     
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