The Cult of Peloton: Reinventing the Fitness Industry, and Becoming a Microcultural Phenomenon

High-tech cycling platform creates a connected community

At Peloton, Robin Arzon, vp, fitness programming, says classes are known as 'shows' and instructors as 'talent.'
Sources: Peloton, Getty Images

Until a month ago, I had never taken a spin class. While friends and colleagues made regular pilgrimages to boutique fitness studios like SoulCycle or Flywheel, the allure of sweating buckets and feverishly cycling en masse to the beat of Beyoncé as an all-too enthusiastic instructor shouts encouragement about “feeling the burn, baby!” eluded me.

Mostly, I prefer to exercise alone.

But there I was at Peloton’s New York cycling studio. Inside the windowless room one wall was lined with mirrors while discreetly located cameras trained on the high-octane instructor. We gathered on the sleek, steel, high-tech bicycles arranged in a semi-circle facing him. A Peloton employee helped me clip my shoes into the pedals and explained how to manipulate settings on the bike’s sweatproof touchscreen. Then the overheads dimmed, the spotlights came on and our teacher welcomed us to the studio as scores of riders streamed the class live in their homes.

It was a ’70s (the Clash, Bowie) rock ride—and within minutes my heart was thumping, my muscles were engaged and sweat poured down my face. We increased resistance to the beat of “Who Do You Love,” pedaled hard, used hand weights to do bicep curls and on the instructor’s command alternated our speed. Half an hour later, it was over. I was drenched but elated, awash in the twin senses of achievement and excitement that seasoned Peloton fanatics know so well. I was hooked.

In the exploding “boutique fitness” category, Peloton, an interactive cycling platform, is the latest spin. But make no mistake, Peloton is not just another indoor bike studio. More than SoulCycle 2.0, this is a tech startup that is reinventing the estimated $83 billion global fitness industry. The 6-year-old company’s business model is based on digital content and a growing rider community—1 million at last count (celebs like Michael Phelps and Neil Patrick Harris are fans)—connected through Wi-Fi and social media that does the heavy brand lifting.

Daily classes can be taken at a studio, beamed on demand at home on a Peloton bike or directly via app to an iPhone or iPad. Sweatproof touchscreens monitor metrics like distance traveled, calories burned, heart rate, resistance and output exerted as measured in watts. A leaderboard allows riders to compete against others.
Peloton

Last year, Peloton generated $400 million in sales—more than doubling its revenue in 2016—via its proprietary bikes ($1,995) and subscriptions ($39 a month for unlimited classes, live and archived), as well as its apps, custom shoes and apparel. One of the most talked about startups, Peloton has gone through five funding rounds, most recently tallying $325 million. During its latest round, Noah Wintroub, a Peloton rider and a vice chairman at JPMorgan, who worked on the deal last year, told Business Insider, “Oh my god, these guys are the Apple of fitness.” And, with its recent $1.25 billion valuation, Peloton is now officially a unicorn. In the midst of a growth spurt with new products and executive hires, including new CFO Jill Woodworth, a former JPMorgan managing director, the company appears poised for an IPO.

Peloton is the brainchild of John Foley. A Harvard Business School graduate whose résumé includes stints at the top of Evite.com, Pronto.com and Barnes & Noble, in 2012, Foley—a triathlete and new father—found it surprisingly challenging to schedule a spin class. Either shut out of the classes he wanted or in one, just not with his preferred instructor, he realized there had a to be a better way. “We said, ‘Let’s democratize this. Let’s let everyone who wants into that class get in. You didn’t have to premeditate it.’”

Taking advantage of the popularity of fitness trends like spinning, Foley designed Peloton with a nod to the on-demand, binge habits of consumers, Wi-Fi connectivity and the exploding use of smart devices. “When we were growing up,” he says, “you went to Channel 3 at 10 and it was Magnum P.I. Now media is shifting. It’s your time. Your location. You’re the boss. You get to control how you consume your media.”

Foley put together a team that built a bike prototype and software to allow for livestreaming and on-demand classes, established social media channels, hired instructors, engineers, sales reps and other staff. They also built their own showrooms, contracted with manufacturers and devised product delivery channels—effectively excising middlemen and maximizing potential for profit. In 2014, Peloton sold its first bike for just under $2,000 and opened its first studio in New York, outfitted for 57 riders.

SoulCycle was founded in 2006 by Elizabeth Cutler, Julie Rice (a former talent manager) and Ruth Zukerman with a single Manhattan studio. The trio revolutionized fitness, offering indoor cycling classes known as “spinning” in candlelit rooms set to high-energy music; a 45-minute class costs $34. Today, there are 89 locations in the U.S. and Canada. Equinox Fitness acquired SoulCycle in 2011, which reportedly netted Cutler and Rice $90 million each.
SoulCycle

Today, Peloton has two studios in New York, one for tread, and 33 bike showrooms across the country. They produce 14 hours of live classes beamed out to people across the U.S. and around the world. The bike’s touchscreen allows for riders to track their metrics, but they also contain mics and cameras so that users can communicate with fellow riders. A leaderboard monitors and pushes competition among participants. The Peloton app can be downloaded to stream classes on iPhones or iPads—transforming any stationary bike into the Peloton experience.

“We sell a bike to every state every week,” says Carolyn Tisch Blodgett, Peloton’s svp for brand marketing. She joined the startup two years ago, persuaded by Foley’s pitch about “truly revolutionizing the fitness industry through technology.”

At this juncture, Foley says the emphasis is on scaling the business, fast. “We need to stay out in front and stay ahead in order to take advantage and be the category winner,” he says. (Last year, Flywheel launched its own high-tech cycling platform for $1,699.)

“The name of the game is convergence—across all areas of the industry, of consumer land, the convergence among different elements of the industry,” says Mortimer Singer, CEO of Traub, a business development and strategy consulting firm. “Those who know how to mix media and disciplines—it’s there where the alchemy is made.”

Singer, however, doesn’t think there’s a showdown looming between Peloton and SoulCycle or Flywheel. (Last week, SoulCycle dropped its long delayed plans for an IPO). “Where there’s Coke, there’s Pepsi,” he says. “There’s definitely a culture behind all of them. I think that there will be over time some consolidation in that space. But for the time being there’s a lot of room to grow.”

During the Consumer Electronics Show in January, Peloton unveiled a high-tech treadmill priced at $4,000 (the rollout is scheduled for this fall). Though officials won’t disclose retention rates, they “are unparalleled in any industry,” according to Jessica Kleiman, the company’s vp of global communications.

Founded in 2010 by SoulCycle co-founder Ruth Zukerman, Flywheel Sports offers both indoor cycling and barre classes in 45 studios in the U.S. and two in Dubai starting at $36 a class. Last year, Flywheel launched its own $1,699 home-cycling platform, FLY Anywhere, with livestreaming classes to compete with Peloton.
Flywheel Sports

To help attract new subscribers, Peloton is offering financing options to entice less affluent riders. The company has also created corporate partnerships, introducing commercial-grade bikes at high-end residential buildings and hotels—making Peloton an “everywhere, whenever” proposition. Earlier this month, it announced a global expansion into Canada and the United Kingdom.

“The challenge with fitness classes is they’re inherently inefficient,” says Tim Calkins, author of Defending Your Brand and a marketing professor at Northwestern University’s Kellogg School of Management. “It’s tough to pay an instructor a lot of money if they’re only teaching 30 people at a time. Nor can the instructor commit too much to that class because they have to teach a lot of other classes” to make a living.

By contrast, Peloton has found a way to scale the instructors that “improves the quality of the offerings.” And, Calkins points out, the hefty price tag can be seen as a plus from a bottom-line perspective. “If they can get the treadmill placed at $4,000, then you’ve really locked people in,” he says, adding that though fitness is a saturated market, Peloton “captures both the convenience of at-home exercising and they tap into all the fun and joys of being part of a class and a broader community. That combination is quite unique.”

This story first appeared in the May 28, 2018, issue of Adweek magazine. Click here to subscribe.

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