The Connected Equipment Report
For years, the at-home fitness space was devoid of innovation — a treadmill was a treadmill. The problem, of course, was that your cardio machine quickly turned into a drying rack.
Then in 2012, Peloton turned the direct-to-consumer fitness market upside-down. In the time since, as Peloton pulled ahead, a growing number of competitors have joined the race to reinvent the home gym.
Flash forward to the present day, and the category is transforming so quickly that it’s a challenge just to stay informed. With that in mind, we’ve compiled the “Connected Fitness Report” to keep tabs on the ever-evolving industry.
Though it’s worth mentioning, this isn’t intended to be a conclusive piece. Instead, this report will be a fluid work-in-progress that’s updated as the market continues to take shape.
- A Category-Defining Company
- Our “Connected” Future
- Reimagining Retail
- Going Public: Initial Peloton Offering
- Game-Changed: The Equinox of ‘X’
- The Connected Equipment Landscape
A Category-defining Company
For the foreseeable future, a concept we’ve come to call the Peloton of “X” will define the fitness industry.
With word that connected equipment and streaming content company Peloton could go public at a value north of $8B, they’ve become the fitness equivalent of Uber, Airbnb, Warby Parker, or any other category-defining startup. And the impact is already being felt.
- Pointing to Peloton’s success, would-be entrepreneurs will cite the company as the shining example of what could be.
- Investors can expect to encounter pitches with a similar refrain, “we’re like Peloton for [activity]”.
- These pitches are not unwelcome; many of those same investors are actively searching, checkbook in hand, for a fitness concept with Peloton-like potential.
Michael Farello, a managing partner at L Catterton—a private equity firm with a reputation for backing disruptive fitness companies like Equinox, Peloton, and ClassPass—has said as much.
Farello told Business Insider that, although the firm has invested broadly in health and wellness, they’re honing in on differentiated concepts within fitness. As more consumers seek out connected fitness experiences that provide a personalized, convenient, and efficient workout, Farello thinks the current stable of fitness startups is only the beginning.
Our “Connected” Future
There’s little doubt that connected equipment and technology-enabled workouts are the future of fitness. What’s less certain, though, is what the path between our analog existence and high-tech future holds.
Disconnected. The new breed of at-home options combine personalized instruction with elements of community, competition, and accountability in order to make workouts less boring and more effective. But, ultimately, users are alone. As an article in The Verge pointed out, “the future of fitness is together, but alone.”
Goals. As Stephen Intille, an associate professor at Northeastern University specializing in health technology, points out, these devices are largely dependent on the goals people set for themselves. Users might not see desirable results if they don’t also change their diets or sustain their exercise habit. Going beyond the bike or streaming workout, making a comprehensive lifestyle change isn’t a pillar of connected fitness — yet.
Data. Following the lead of Fitbit and the Apple Watch, connected fitness companies could partner with insurance providers, research centers, and other health-related companies, providing incentives for consumers in exchange for exercise data. Both Tonal—a tech-enabled, Bowflex-type machine—and Hydrow—an indoor rowing machine with live and on-demand classes—told The Verge that they’re not actively pursuing this option but haven’t ruled it out.
Platform. While Peloton is diversifying its equipment line, with the bike, treadmill, and rumors of other devices, Mirror wants to be the hardware that serves up the best fitness experiences from studios like CorePower Yoga, Pure Barre, and Physique 57. Meanwhile, Technogym appears to be taking the middle ground, offering multiple pieces of equipment and content from partners like Rumble.
Zooming out. Given the speed of innovation and the rate at which new products are hitting the market, it’s easy to lose sight of how young this category really is. Peloton didn’t deliver its first bike until 2014. Prior to that, cardio equipment hadn’t evolved in decades. Now, it’s getting hard to keep up. While it’s too early to tell where we’ll end up, it’s clear that we’ve only just begun to scratch the surface.
Electronics retailer Best Buy will begin selling Flywheel Sports’ at-home bike and Hydrow’s rower in a dedicated fitness section of its stores. The assortment will also include a compression recovery system from NormaTec, muscle rollers from Hyperice, and connected treadmills by NordicTrack.
In recent years, fitness watches and activity trackers have been some of Best Buy’s fastest-growing products. Now, the company is doubling down on exercise, sleep, and health in an effort to expand its tech expertise beyond laptops and televisions. In addition to floor space, Best Buy will also offer delivery and installation from its Geek Squad teams.
On the fitness front: Showrooms have been the retail channel of choice for connected fitness companies like Peloton, Tonal, and Mirror who 1.) are positioning themselves as high-end brands and 2.) want to control every part of the customer experience. Flywheel, on the other hand, can’t be as choosy — its at-home bike is also available on Amazon.
Takeaway: This news speaks to the growing interest and opportunity in connected fitness equipment, health tech, and on-demand workouts. How long until we see Target or Costco push into the fitness space?
IPO: INITIAL PELOTON OFFERING
After months of speculation, Peloton has filed, confidentially, to go public. The confidential nature of the filing means we don’t know many of the specifics (for now), but here’s what we do know:
- The company’s most recent funding round attracted $995M at a $4.15B valuation.
- They’ve built a cult-like following and loyal subscriber base.
- They have first-mover advantage, having pioneered the content + connected equipment category
Currently, it’s a race for second among Peloton’s competitors. But that doesn’t mean the company will cruise to the podium.
While we await the S-1 filing, consider a few potential risks.
Price. There will be more competition at a premium as well as at a lower price point — Echelon (bike + content) and Zwift (content-only) already offer a less expensive cycling experience.
Competition. Peloton’s success has opened the door for a growing list of connected equipment competitors. Mirror, Tonal, and Hydrow have been gaining steam. Technogym and Flywheel have entered the space. And most recently, Equinox announced its push into connected equipment with a SoulCycle bike and Precision Run treadmill.
Access. Equipment is just one aspect of Peloton’s competition. In 2018, US health club industry revenue reached $32.3B, a 7.8% increase from 2017. Over the same period, membership to a boutique studio increased 121%. At the same time, there have never been more streaming, on-demand, and audio fitness options — think Aaptiv, Freeletics, Daily Burn, and Sweat.
All that to say, Peloton will face challenges in consumer acquisition and retention as the broader fitness category becomes more competitive.
A Numbers Game
Speaking of retention, churn (the rate of attrition for a subscriber base), will be the subject of many a Ctrl-F when the S-1 drops. Whatever the current number is, it’s almost guaranteed to dip over time.
Building a company around behavior modification, like convincing people to start and adhere to an exercise habit, is incredibly difficult. Historically, the entire fitness industry (digital and traditional) has been built on breakage — the idea that people will sign up for a membership they’ll never use. Peloton is banking on the exact opposite: that their equipment and content is so good that users will come back consistently, for years.
From this perspective, betting on Peloton isn’t actually a wager on their ability to execute, it’s a bet that users will stick to their fitness routine over time. In reality, even if Peloton or its competitors create the most exceptional exercise experience the world has ever known, the average person will drop off.
Of course, the counterargument is the fact that there’s a $2,000 upfront cost of the bike. But that argument simply doesn’t hold up. If it did, the golf clubs, skis, and mountain bike in the garage wouldn’t be collecting spider webs. Plus, there’s nothing stopping people from selling or buying a Peloton bike secondhand. At this point, it might not be too large an issue, but it will be. Especially when there have been bikes for sale on Craigslist for under $1,500.
In theory, the solution to creating stickiness among users is threefold: the content, instructors, and product innovation.
Content. There’s no denying that Peloton’s content is top-notch. And all signs point toward that continuing to be the case. The company recently hired two television and digital-media execs to lead its original content division. This move comes as Peloton prepares to open new production studios in New York and London amid plans to produce more than 300 classes per week across indoor cycling, indoor/outdoor running and walking, bootcamp, yoga, meditation, strength training, and stretching.
Talent. Like their content capabilities, Peloton’s roster of instructors is second to none. The company credits trainers like Robin Arzon as being essential to its success. And for the trainers, working for Peloton is a dream job — they’re paid well and are achieving celebrity status. But this asset could prove to be a liability for Peloton. As more competitors enter the space and the instructor marketplace heats up, Peloton is at risk of having their talent poached. Sure, they can defend against it with contracts and compensation, and users will find new favorites, but losing a top instructor is inevitable.
Innovation. Then there’s Peloton’s Tread offering. Hoping to replicate the success of its bike, the company introduced a $4,000 treadmill. However, the Tread hasn’t popped like the bike. In an effort to expand its customer base and product offering, the company also introduced Peloton Digital — a live and on-demand audio app. As a more accessible version of Peloton’s content, the app is sure to fair well. However, the barrier to entry for fitness apps is low and the space is already crowded, making it difficult for Peloton to separate itself here.
While there were rumors that the company would introduce “a third piece of fitness equipment”, there hasn’t been much movement on the product innovation front. This makes Peloton’s recent hiring of an M&A lead much more interesting. In speaking with Bloomberg, Peloton CEO John Foley said: “We do consider ourselves an innovation and technology shop first, so we have some pretty sexy, cool stuff on the horizon in the R&D shop.” Foley then went on to say the company will be opportunistic in the M&A space.
Looking ahead, whether it’s upstart competitors, consolidation in the space, or Peloton’s eventual IPO, there has never been more innovation in the fitness space. While we could continue to speculate as to winners, losers, and what’s next, we’ll have to let it play out. Now we wait.
The Equinox of ‘X’
Equinox Group recently announced its foray into connected fitness. Launching later this year, Equinox will offer connected equipment and streaming content for the at-home market that encompasses its portfolio of fitness brands, including Equinox, SoulCycle, and Precision Run.
- The SoulCycle stationary bike, identical to those found in its studios, is getting a screen and will be available for purchase. (FWIW: Both the SoulCycle and Peloton bikes were designed by Eric Villency.)
- Proprietary Woodway treadmills, also equipped with a screen, will bring the Precision Run studio experience into the home.
- A yet-to-be-named digital platform and app will feature live and recorded classes led by top instructors from Equinox’s portfolio of fitness concepts.
- Prices were not announced, but across the connected fitness landscape, costs range from $1,000 to $4,000 — plus a $40–$50 monthly subscription fee for content.
As we’ve detailed in our ever-evolving Peloton of ‘X’ list, connected equipment and streaming content are redefining the fitness industry. But, in entering the at-home space, Equinox isn’t trying to beat Peloton at their own game. Equinox is playing a different game altogether.
For perspective, Peloton has sold more than 400,000 bikes and counts more than 1M subscribers among its user base. Some reports put their 2018 revenue north of $700M.
Equinox is a luxury fitness company backed by The Related Companies, whose portfolio of brands includes Equinox, PURE Yoga, Blink Fitness, and SoulCycle. Across all its brands, Equinox counts more than 200 locations that generated $1.3B in 2017 revenue.
Although Peloton has assembled a strong, category-leading talent pool, Equinox and SoulCycle created an in-house talent agency to represent their instructors and trainers. Additionally, NYC-based PROJECT by Equinox serves as a class and talent incubator for the brand.
While Peloton’s “Hotel Finder” is smart, and there’s an opportunity to sell their equipment commercially, Equinox has pushed much further into hospitality, opening the first-of-its-kind hotel in New York. With additional hotels planned for Los Angeles, Santa Clara, California, Seattle, Chicago, and Houston, plus 90 health clubs, Equinox will have plenty of opportunities to feature its own equipment.
The Equinox of ‘X’. While countless connected fitness companies have piggybacked on Peloton, Equinox may have leapfrogged the entire category.
“It’s really the intersection of digital and physical that makes this a very different concept to begin with.” – Jason LaRose, CEO of Equinox Media
As we’ve discussed, the near-term future of fitness will be defined by access—the option to work out at home, go to the gym, or tune into an audio class—and won’t be confined to an either-or decision between digital or in-person exercise.
If that’s to be believed, the Equinox of ‘X’ represents an omnichannel approach to exercise that offers components of real-life workouts and community: access the SoulCycle or Precision Run experience in a studio, in your living room, or in an Equinox hotel or health club.
With Equinox’s entrance into the space, what set the Peloton of ‘X’ category apart—“at-home”—might now result in them being left behind.
The Connected Equipment Landscape
Peloton | Peloton offers a smart bike, treadmill, and on-demand fitness classes via its app. The company pioneered the at-home connected fitness model. What began as a solution to a demand issue for boutique fitness studios has since become the gold standard of connected equipment.
- Founded: 2012
- Funding: $994.7M
- Backers: TCV, Tiger Global, True Ventures, Wellington Management, Fidelity, NBCUniversal, Felix Capital, Winslow Capital
Tonal | By combining an interactive LED screen and electromagnetic weights with a fold-out bench and cables, Tonal has managed to pack an entire gym with an AI-powered personal trainer into a wall-mounted strength training system.
- Founded: 2015
- Funding: $90M
- Backers: L Catterton, Evolution Media, Shasta Ventures, Mayfield, Sapphire Sport
Mirror | Mirror’s sleek device beams boutique fitness classes into the home by way of a reflective display that’s actually an interactive LED screen. The company isn’t solely reliant on producing their own content; they want to be the hardware that serves up the best fitness experiences from studios like CorePower Yoga, Pure Barre, and Physique 57.
- Founded: 2016
- Funding: $40.8M
- Backers: Spark Capital, First Round Capital, Lerer Hippeau, BoxGroup
Hydrow | Hydrow refers to its product as the Live Outdoor Reality (LOR)™ rower. The company’s workouts offer a live, on-river experience led by professional rowers, some of whom compete for the US national team.
- Founded: 2017
- Funding: $32.8M
- Backers: L Catterton, Rx3 Ventures, The Yard Ventures, Wheelhouse, The Raptor Group, Castor Ventures
Equinox | Equinox Group plans to offer connected equipment and streaming content for the at-home market that encompasses its portfolio of fitness brands, including a SoulCycle bike and Precision Run treadmill.
- Launching: Fall 2019
- Funding/Backers: Equinox Fitness, a subsidiary of The Related Company, owns Equinox, PURE Yoga, Blink Fitness, Precision Run, and SoulCycle.
Echelon Fit | Echelon initially launched with a smart bike and streaming classes. Now, the company is building out an equipment and content ecosystem that also includes Echelon Reflect, the company’s Mirror-like competitor, and FitPass, the company’s take on Daily Burn or Peloton Digital.
- Founded: Viatek Consumer Products Group launched Echelon in 2018
- Funding: total n/a
- Backers: Northcastle Partners
Technogym | The Milan-based maker of premium fitness equipment is ramping up its digital platform and smart equipment line, TECHNOGYM LIVE. After unveiling the TECHNOGYM BIKE, the company said it would introduce additional training experiences for running, bootcamp, rowing, and boxing. Worth mentioning: like Mirror, the platform will serve up content from instructors and studio partners like Rumble Boxing.
- Launching: Technogym announced its connected equipment and streaming content in partnership with “At-home 360” and its own TECHNOGYM LIVE.
- Funding/Backers: Founded in 1983, Technogym is an international supplier of technology and design-driven products. The company has a presence in over 100 countries, more than 80,000 wellness centers, and 200,000 private homes.
FightCamp | FightCamp by Hykso is bringing boxing into the home with a punching bag and mitts equipped with punch-tracking sensors to measure the count, type, speed, and “intensity” of your jabs. The company’s database of workouts and instruction is available via iOS.
- Founded: 2016
- Funding: $1.6M+
- Backers: 500 Accelerator, BCF Ventures, Panache Ventures, StreetEdge Capital, Y Combinator
Pivot | Pivot’s 3D-enabled, AI-driven strength training, HIIT, and cardio system promises the most accurate form-tracking and real-time feedback among connected fitness companies, employing live trainers that are on call to virtually assist subscribers.
- Founded: Originally founded in 2015, Pivot debuted as SmartSpot — a 3D camera and virtual personal trainer sold to gyms.
- Funding: $17M
- Backers: DCM
VOLAVA | This Barcelona-based connected fitness company currently offers a Peloton-like smart bike with live and on-demand classes, as well as indicating plans to introduce a connected boxing product à la FightCamp.
- Founded: 2017
- Funding: €1.2M
- Backers: Inveready
Flywheel | This boutique cycling studio operator threw its hat in the connected fitness ring in 2018, offering a bike-only or bike and mounted tablet option. It now lists its bike on Amazon and Best Buy.
- Founded: 2014
- Funding: $120.9M
- Backers: Acquired by Kennedy Lewis Investment Management in May 2019
Zwift | Because Zwift does not manufacture its own equipment, it almost didn’t make this list (and you could argue it shouldn’t). But, it’s hard to argue that they’re not relevant to the discussion. Zwift riders hook their own bicycle up to a trainer that’s used to measure performance metrics like power and exertion. Then, those metrics are input into Zwift’s virtual world as users participate in gamified races or group rides.
- Founded: 2014
- Funding: $164.5M
- Backers: Highland Europe, Ion Pacific, Novatar, True., Causway Media Partners, Shasta Ventures, Waypoint Capital