The Connected Fitness Wars: Peloton, Mirror, Tonal, Hydrow Battle it Out

From Netflix to Hulu and HBO Max to Disney+, the streaming wars are upon us. Similarly, as the Peloton of ‘X’ category earns hype and heaps of funding, the connected fitness wars have officially arrived. Now, new entrants, legacy companies, and the next generation of fitness brands are going head-to-head in an attempt to win over would-be exercisers.

But, taking a closer look, the word ‘war’ might be a misnomer. Instead of an endgame, connected fitness is proving to be more of an industry-wide evolution than a winner-take-all proposition. Going a step further, maybe connected fitness isn’t quite as innovative as it was made out to be. Or is it that Peloton’s perceived “moats” aren’t a real deterrent? Let’s take a look.

By the Numbers

There’s no denying that connected fitness has been and will continue to be a disruptive force. But let’s put its impact in perspective. (For more, check out the incredible comments on my co-founder’s recent LinkedIn post.)

Peloton connected fitness subscribers: 560K
Peloton US addressable market: 45M households
US gym/studio memberships: 60.9M
US population: 327M

Paving the Way

Peloton did the hard work of popularizing connected fitness. Now, everyone wants to cash in. And, as is often the case, defending the top spot can be as difficult as obtaining it in the first place. If there’s any doubt, consider a few developments from 2019.

Mirror, Hydrow, and Echelon Fitness each added new funding. Equinox announced plans for a Precision Run treadmill, SoulCycle bike, and yet-to-be-named digital platform. Technogym unveiled its LIVE platform and accompanying equipment. Life Fitness rolled out on-demand classes across all of its cardio equipment. And iFit, whose parent company ICON Health & Fitness also owns NordicTrack, ProForm, and Freemotion, secured $200M in funding to accelerate its interactive streaming platform.

For Context

While Peloton and other startups begin at zero, equipment manufacturers and established brands are leveraging their existing capabilities, distribution channels, and customer base to build out their connected fitness offerings.

Life Fitness equipment is in 250K facilities. Its annual revenue is about $1B.
Across its portfolio, Equinox Holdings has 135+ locations and $1.43B in 2018 revenue.
iFit has 330K paying subscribers. In Q3 ’19, they added 77K subscribers.
Technogym brought in ~$700M in 2018. 50M people train on their equipment every day.

More on “Moats”

In medieval times, physical moats were built to protect castles from invaders. In startup speak, moats relate to defensibility. More specifically, a moat is how a company establishes and maintains competitive advantage, market share, and long-term viability.

With respect to Peloton, the company has doubled and tripled down on their moats — better equipment, talented instructors, subscription-based content, and an obsessive community.

Initially, detractors pointed out the obvious, Peloton simply put a touchscreen on a stationary bike. But time and time again, its passionate user-based sprang into action, singing the company’s game-changing praises and proving naysayers wrong. And for years, all the company had to say was, “if it’s as simple as putting a screen on a bike, why isn’t everyone doing it?”

Flash forward a few years and, well… everyone is doing it. Making matters worse, Peloton’s public offering did little to solidify its position atop the category. In fact, it resulted in more intense scrutiny as onlookers question their every move.

Peloton might have gone down market too soon. By appealing to an affluent and aspirational customer, Peloton built a cult-like brand and community to rival SoulCycle. Then, at the behest of the public market, they cut prices, announced cheaper equipment, and confronted messaging issues. And in the process, balancing affluence and aspiration with affordability proved difficult to navigate. As Peloton’s bloated valuation looms large, the company is forced to focus on growing from one earnings call to the next.

Meanwhile, the competition is finding its footing. Mirror plans to move beyond in-home workouts to become the go-to screen for any immersive experience. But, like Peloton, Mirror is also realizing that their hardware isn’t as defensible as they once thought. Echelon now offers an interactive Mirror-like device, and it’s only a matter of time until others follow suit.

Looking ahead: connected fitness might end up being a pit stop on the road to augmented and/or virtual reality. Although Zwift doesn’t make hardware, they have created a virtual fitness world for their thriving user base. And Hydrow CEO Bruce Smith told us that the company could release rock climbing and cross-country skiing products that utilize Live Outdoor Reality or augmented reality to create an immersive environment.

Circling Back

At the onset, streaming services like Netflix were a disruptive force and an escape from pricey cable bundles. Now, it’s ubiquitous. So much so, in fact, that we can’t possibly afford every subscription or even keep up with all the new shows.

Similarly, connecting fitness is quickly becoming a commodity — something that could soon be available on every piece of equipment, or at least most of it. And if that’s true, it begs the question, was connected fitness all that innovative to begin with?