Peloton is cutting the price of its fitness hardware and increasing subscription fees, a drastic shift meant to correct the company’s downward spiral.
The original Peloton Bike will now cost $US1,195, a price reduction of $US300, while the Bike+ will cost $US1,995, a $US500 drop from its initial $US2,500 price. The company’s treadmill, the Tread, gets a moderate adjustment down $US150 to $US2,345. Peloton will continue to charge a shipping fee of $US250 for the Bike and $US350 for the Tread. The price for the Bike+ includes shipping and setup.
“We want more people to be able to afford our hardware,” Peloton said in a statement to Bloomberg. “This is a strategic decision to play for scale and increase market share.”
To recoup the income lost by these price adjustments, Peloton will increase monthly subscription fees for the first time in eight years to $US44 from $US39 in the U.S. and to $US55 from $US49 in Canada. International prices will remain the same for now.
“There’s a cost to creating exceptional content and an engaging platform, and this price increase will help us continue to deliver for our members,” Peloton said in a blog post shared with CNBC. “The price of hardware relative to the subscription is one of many levers by which we are looking to reduce barriers to entry.”
The price cuts will be effective starting at 6 p.m. eastern time today, while the All-Access Membership subscription fee, which gives customers access to visual workout classes, will become more expensive starting on June 1.
The goal is to lower the barrier to entry to get more Peloton products into consumers’ homes, at which point the company can begin to slowly generate more revenue via a subscription fee. The tactic isn’t without the risk of alienating current customers who will now be forced into paying a larger monthly fee after spending thousands on hardware that has lost some of its value.
Peloton enjoyed commercial success at the start of the pandemic as customers were forced to work out from the safety of their homes. Recent months haven’t been so kind to the exercise equipment company, which has all but imploded following product recalls, declining demand, and poor business management. Earlier this year, the once-pandemic darling cut about 2,800 jobs (roughly 20 per cent of its workforce), replaced its CEO, and reorganised its leadership team.
Taking the helm as CEO of Peloton is Barry McCarthy, who previously worked as CFO of Spotify and CFO of Netflix. McCarthy quickly shot down suggestions that he’d been brought in to sell the company after its value tanked to $US8 billion (around $11 billion in Aussie money) from its $US50 billion (~$70 billion) high. In an interview with Financial Times, McCarthy hinted at major changes to Peloton’s pricing structure, including a revamp of its subscription fee.
That subscription fees are going up following a hardware price drop and a former streaming service CEO joining the company also means we could see a focus shift from hardware to content coming down the line. After all, you don’t need to own Peloton’s equipment to subscribe to its app and follow along on classes with your own gear.
Activist investor Blackwells Capital has continued applying pressure on Peloton to consider a sale, arguing the company hasn’t made much progress under its new leadership. As of the second quarter this year, Peloton had 2.77 million fitness subscribers and more than 6.6 total members.