Peloton raises subscription fees, lowers bikes, trades prices

A Peloton Interactive Inc. logo on a stationary bike at the company’s showroom in Dedham, Massachusetts, USA on Wednesday, February 3, 2021.

Adam Glanzman Bloomberg | Getty Images

Peloton is raising monthly fees for its on-demand fitness content for the first time, while also lowering the price of its bikes, bikes + and treadmills to reach new customers under Chief Executive Barry McCarthy.

McCarthy, who has led the company for more than two months, is set to announce sweeping changes internally on Thursday. This comes at a time when Peloton is trying to bring about a sharp fall in its share price.

Peloton shares initially jumped into the news before they closed after 11 a.m. due to trading volatility. Shares have resumed slightly above but have recently fallen nearly 4%.

McCarthy, a former Netflix and Spotify executive, was outspoken in a recent press interview about what he saw in Peloton as an opportunity to reduce hardware costs. This would, in theory, reduce the barrier for a consumer to enter and then the company could focus on increasing its monthly recurring revenue.

“The price changes announced today are part of CEO Barry McCarthy’s vision to grow the Peloton community,” a company spokesman told CNBC.

Piloton’s all-access subscription plan in the United States will be effective from June 1, with prices ranging from $ 39 to $ 44 per month. In Canada, the fee will increase from $ 49 to $ 55 per month. Prices for international members will remain unchanged, Peloton said. For those who do not own any Peloton equipment, the cost of a digital subscription only will still be $ 12.99 per month.

Peloton explained the decision in a company blog post shared with CNBC. “There’s a cost to creating awesome content and an engaging platform,” the company said. The price increase will allow Peloton to continue distribution to users, it added.

Meanwhile, starting at 6pm ET on Thursday, Peloton will lower the prices of its attached-fitness bikes and treadmills in the hope of making its products more affordable to a wider audience and increase its market share due to an epidemic-fueled demand.

  • The price of this bike will come down from $ 1,745 to 1, 1,445. Cost includes a $ 250 shipping and set up fee.
  • The bike + will come down from $ 2,495 to 99 1,995.
  • The trade machine will sell for $ 2,695, down from 2,845. Trade costs include a $ 350 shipping and set up fee.

Peloton is currently exploring a rental option in selected US markets, where users can pay a monthly fee anywhere from $ 60 to $ 100 for a rented bike and access to its workout content library. The company says it recently expanded the test to additional markets and added Bike + T as another rental option.

As of December 31, Peloton counted 2.77 million connected fitness subscribers. Its total membership is over 6.6 million, including people who only pay for access to its workout classes.

The company has already shown a tendency to make its hardware more affordable, especially pushing the McCarthy subscription model. Earlier this month, it launched its new energy product, the Peloton Guide, for 295. This is $ 200 less than what Peloton said last November, retailing the device bundled with a heart rate armband.

Peloton under pressure

In recent weeks, Peloton’s stock has been trading below $ 29, where it has set its price in its initial public offering in 2019 and pushed it back to pre-epidemic levels. Shares have fallen nearly 35% since the day McCarthy was announced as CEO.

McCarthy took over as CEO in early February from Peloton founder John Foley, who is now acting chairman.

At the time, Peloton also announced plans to cut about 2,800 jobs in its business and save thousands of dollars from annual costs as part of a massive restructuring and operational reset.

Still, there are concerns that McCarthy, who says he still works closely with Foley, is not doing enough to regain profitability.

On Wednesday, activist Blackwell Capital recaptured his call for Peloton to consider selling the company, arguing in a presentation that business shareholders are now worse off than they were before McCarthy took over. Peloton did not comment.

What Blackwells and other analysts might agree on is that Peloton has built a loyal base of customers who have invested in the company’s workout equipment and continue to pay a monthly fee for accompanying content. Its average net monthly combined fitness churn in the last quarter was 0.79%. The lower the churning rate, the better the news for Peloton.

As of December 31, Peloton’s Connected Fitness subscribers also averaged 15.5 workouts per month.

Peloton continues to introduce new types of classes, from yoga to meditation to kickboxing, to give its members more for their money.

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