Blackwells Capital
Charting a new course under CEO Barry McCarthy, Peloton is shifting gears.
Price point. Rethinking its connected fitness bundle, the company is cutting equipment prices while increasing its monthly content subscription fee.
- Hardware. The price of the Bike and Bike+ will drop $300 and $500, respectively, to $1,445 and $1,995. The Tread will be cut $150 to $2,695.
- Content. Starting in July, US members will see the monthly subscription go up to $44, from $39. In Canada, the monthly fee goes from $49 to $55.
Why it matters: A veteran of Netflix and Shopify, McCarthy sees subscriptions as central to Peloton’s turnaround. A departure from founder John Foley’s hardware-focused vision, McCarthy has downplayed the role of equipment, telling the NYT:
“The magic doesn’t happen in the sheet metal… The magic happens on the screen.”
Reducing upfront equipment costs, McCarthy hopes to attract a broader customer base while focusing on recurring revenue.
Too little, too late? As Peloton rolled out its new pricing, activist investor Blackwells Capital once again called for the company to be sold.
In the firm’s view, Peloton has failed to make meaningful changes under McCarthy, causing shareholders to lose another $2B in market value.
FaaS. Positioning the company for a sale and charting a new path forward, Blackwells said Peloton should focus on fitness-as-a-service, or FaaS, by:
- focusing on software
- outsourcing manufacturing
- creating an open ecosystem
- partnering with equipment makers
In doing so, the firm believes Peloton could become “the central technology platform and one-stop shop for integrating all aspects of wellness.”
Takeaway: As we detailed in Issue No. 176, Peloton’s quest to become the Apple of fitness hamstrung the brand. Forgoing vertical integration, new content/software/hardware bundles are emerging. Whether Peloton pursues FaaS or not, open ecosystems will continue to gain traction.
