Debunking some twisted facts surrounding the Peloton IPO

Now that Peloton filed for IPO, there is a whole lot of opinions in the media from people who don’t own the product or subscribe to the digital service. I don’t intend to offer an investment opinion in this post. I do, however, want to dispel some of the FUD (Fear, Uncertainty, and Doubt) being spread around by so-called “experts” and “journalists.”

Peloton vs local gyms

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In order to exercise at your local gym, you have to get dressed, get in the car, drive there. Most of us cannot do that while their kids are having breakfast and getting ready to go to school.

Once you get to your gym, you then have to wait in line for the equipment that might be broken or dirty. Once you are using it you have to be courteous and not use it too much if there are people waiting.

Moreover, if you need guided training such as spin classes, you often have to conform to a schedule someone else is imposing on you.

We spend the majority of our lives going out of our way to be courteous and conforming to schedules, not of our own making. At-home exercise is a welcome respite. My time on my Peloton Bike in my unfinished basement is my time.

Peloton’s target customers are busy middle-class professionals

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Peloton commercials show healthy attractive upper-middle-class professionals exercising with young, attractive, super-model like instructors, some of whom are fitness celebrities, in their urban penthouse condos overlooking the city. That is true.

There are certainly some people in the Peloton community who are considered “rich” by most modern standards. In my experience in the Peloton community, however, most people I’ve met fit the same general social category as me — skilled professionals, many in dual-income households, who have busy lives and otherwise would not be able to find time to take care of themselves.

The basic value proposition of Peloton is the following: they offer quality instructor-led structured training classes that can be taken anywhere, and anytime — and that includes home, workplace gyms, hotel gyms, outdoors, and, yes, your local LA Fitness (if you must).

Even with the cost of both hardware and streaming service taken into the account, Peloton pays for itself within about two years — not just financially compared to brick and mortar gyms, but also in terms of time savings and convenience.

Peloton and the competition

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Peloton should primarily be compared to the following services:

  • Various exercise-at-home video programs that existed since the advent of VHS tapes. In this regard, Peloton is like Netflix of exercise videos.
  • Modern-day exercise apps and services that have recordings of instructors guiding the user through a training plan. A good example of one is FitStar (aka Fitbit Coach, soon to be called Fitbit Premium) (I’ve used it prior to getting Peloton). In this regard, Peloton is an integrated service that offers a variety of different workouts to fit different lifestyles.

I do not believe that comparing Peloton to Zwift, TrainerRoad, or other similar cycling-specific training services is valid. Those services are niche products targeted at a specific category of activities. While Peloton does offer cycling power zone training, the experience is very different from using specialized training equipment specific to road cycling.

In addition to Peloton Bike, I have a Concept2 RowErg machine. I tried the Regatta Fitness app for two weeks.

“Regatta” is a prime example of an app and a service that Peloton can be best compared to. Priced similarly to Peloton Digital (around $20/month), it offers a range of full-body workouts centered around rowing. Just like you can pair Peloton Digital with third-party spin bike that offers power, resistance and cadence metrics via Bluetooth, you can pair Regatta app with Concept2 PM5 monitor.

Comparing Peloton to Regatta, not only do Peloton instructors come across as premium fitness personalities, but Regatta also utilizes generic non-recognizable music in the background. All things being equal, this means Peloton spends more money on instructors, studios, and music licensing.

Reasons for Peloton hardware

But, Oleg, you might ask, Peloton also sells a $2000 indoor spin bike and a $4000 treadmill. I have an answer for that as well.

The established TV-watching user experience involves clunky remotes complex enough to operate a nuclear power plant. Apple felt that in order to deliver a quality television experience to their users in the world dominated by poorly executed cable box user experience they have to make their own piece of hardware called AppleTV.

I believe that demonstrating what a quality spin bike or treadmill should be like is the reason for Peloton to sell their own hardware.

Peloton is not stopping anyone from using what they call Peloton Digital for $19.49/month, which as I found is competitively priced to other similar services. They offer a spin bike and a treadmill hardware to create a more integrated premium experience for their customers. This is why the Peloton CEO downplays the fact that they sell hardware.

Community experience

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Peloton cultivates and benefits from social media engagement between their instructors and the community. There is a number of Peloton “tribes” on social media catering to all sorts of different interests, fitness levels, and personality types.

Community is important to fitness. Even the most anti-social types like me have a need for a supportive community that will offer advice and support.

Whether Peloton purposely goes out of their way to cultivate their social media presence or it is just a product of the modern times is hard to tell. What is obvious, however, is that no other fitness brand has such a strong social media presence except for maybe Concept2.

Some final thoughts

Ever since Peloton announced their IPO, a number of so called experts have emerged who are spreading misinformation and myths about the company. It is clear that most of them don’t even own any Peloton hardware, or subscribe to the digital-only service.

Some even went as far as accusing Peloton of not solving the world’s health crises.

I say ignore them. It was not so long ago that people missed the entire point of Netflix.

Categories: Ecosystems

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