Peloton raises subscription fees and cuts prices for bikes and treads

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

Adam Glanzman | Bloomberg | Getty Images

Peloton is increasing the monthly fee for its on-demand fitness content for the first time ever, while also reducing the prices of its Bike, Bike+ and Tread machines in a bid to reach new customers under the leadership of Managing Director Barry McCarthy.

McCarthy, who has been at the helm of the company for just over two months, is expected to announce the sweeping internal changes on Thursday. It comes as Peloton attempts to reverse a recent sharp drop in its share price.

Peloton shares first jumped on the news before being halted shortly after 11 a.m. for trading volatility. Stocks have rallied slightly but have recently fallen around 4%.

McCarthy, a former Netflix and Spotify executive, was candid in recent press interviews about what he saw as an opportunity at Peloton to cut hardware costs. This, in theory, would lower the barrier to entry for a consumer, and then the business could focus on growing monthly recurring revenue.

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

Starting June 1, the price of Peloton’s all-access subscription plan in the US will increase to $44 per month, from $39. In Canada, the fee will increase to $55 per month, up from $49. Pricing for international members will remain unchanged, Peloton said. The cost of a digital-only subscription, for people who don’t own any Peloton gear, will still be $12.99 per month.

Peloton explained the decision in a company blog post shared with CNBC. “Creating great content and an engaging platform comes at a cost,” the company said. The price increases will allow Peloton to continue delivering to users, he added.

In the meantime, starting Thursday at 6 p.m. ET, Peloton will slash the prices of its connected fitness bikes and treadmills in hopes of making its products more affordable to a wider audience and increasing its market share following a surge in demand fueled by the pandemic.

  • The price of his bike will drop from $1,745 to $1,445. Cost includes $250 shipping and installation.
  • The Bike+ will drop from $2,495 to $1,995.
  • The Tread machine will sell for $2,695, down from $2,845. The tread cost includes $350 shipping and installation.

Peloton is also currently testing a rental option in select US markets, where users can pay a monthly fee of between $60 and $100 for a rented bike and to access its library of workout content. The company said it recently expanded the test to other markets and added the Bike+ as another rental option.

As of December 31, Peloton had 2.77 million fitness-connected subscribers. It has over 6.6 million total members, including people who only pay to access its workout classes.

The company has already shown a penchant for making its hardware more affordable, especially as McCarthy pushes the subscription model. Earlier this month, he started selling his new strength product, Peloton Guide, for $295. That’s $200 less than what Peloton said last November the device, which comes with a heart rate armband, would cost at retail.

Platoon under pressure

In recent weeks, Peloton’s stock has traded below $29, where it was at its initial public offering price in 2019, also bringing it back to pre-pandemic levels. Shares have fallen nearly 35% since the day McCarthy was announced as CEO.

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

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

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

On Wednesday, activist Blackwells Capital reiterated his call for Peloton to consider a sale of the company, arguing in a presentation that the company’s shareholders are worse off than they were before McCarthy take over. Peloton had no comment.

What Blackwells and other analysts can agree on, however, is that Peloton has built a loyal base of subscribers who have invested in the company’s workout equipment and continue to pay the monthly fee. for the content that goes with it. Its average fitness-related net monthly churn in the last quarter was 0.79%. The lower the churn, the better the news for Peloton.

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

Peloton continues to roll out new types of classes, from yoga to meditation to kickboxing, in an effort to give its members more bang for their buck.

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