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Apr 13, 2022 4 min read

Will Peloton’s New Product Grab Our Attention?

Will Peloton’s New Product Grab Our Attention?

Wiser! Essay: The pandemic was good for Peloton's business. And then it wasn't. They over estimated demand, got their supply chain wrong and have been on a slippery slide back to where they started 2 years ago. What do they have to do to get your Attention?



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Will Peloton’s New Product Grab Our Attention?

Back Story:  Peloton had a great ride (excuse the pun) during lockdown. The stock went from $23 to a high of $163 in 2020. Then the world started its return to normal, gyms re-opened and people started going out.

The stock has now fallen back to where it started ($25 on 13th April).

Source: Yahoo Finance

Peloton has also taken some missteps. They encountered significant supply chain issues and massively overestimated the demand for their bikes in 2021.

In February this year, the company replaced the CEO (with Barry McCarthy, former CFO of Netflix and Spotify). They also let go as many as 5,000 staff, shut 15 retail stores and reduced their sales and marketing by 40%.

Controversy:  But, the most controversial move by the former CEO, John Foley, which contributed to his ousting, was to sell $50 million of Peloton stock to Michael Dell's MSD Partners at a 12% discount.

However, the change in leadership has not settled investors. As I put this piece to bed, Peloton's market cap is now (only) $7.8 billion, down from its market valuation of $50 billion just 16 months.

Peloton’s new CEO is maybe even worse than its first, activist investor Blackwells Capital argued in a new presentation. Blackwells said that “shareholders are worse off now” than before current boss Barry McCarthy replaced John Foley two months ago. Peloton shares are down nearly 30% this year and have lost virtually all of their pandemic gains.

Activist investor, Blackwells, who owns c5% of Peloton, has been hyper critical of the new CEO saying that he hasn't gone far enough. They want to see a trade sale. With Apple being the most hotly tipped preference.

Which makes a ton of sense given Apple's pursuit of our attention and their strategic shift to subscriptions and services.

In Pursuit of Attention

Attention:  Meanwhile, in an effort to regain our Attention, the premium-priced fitness brand has launched a new product.

The Peloton Guide (awful name, #JustSayin) is a camera that sits on your TV and films you during a workout. Starting at around $300 and costing $13/ month subscription, it's a first-generation device, which frankly, is limited in its capability (it's just counting your reps and not as sophisticated as the Microsoft Kinetic was a decade ago).

Peloton Guide

Strategy:  The significance of the new product is that it signals Peloton's attempts to broaden the product range from (just) the bike and treadmill as a means to increase subscriber numbers.

There are currently around 3 million Peloton subscribers generating annual revenues of $4 billion. Whilst there are calls for Peloton to focus (just) on developing software and great content, Peloton is in control of its own rails for users that buy the high priced hardware.

Peloton has followed the same strategy as Apple (just not as well executed).

Make your hardware products highly desired and charge a subscription for the things you do on them. Peloton's challenge is that they're not Apple, nor do they have anything like the depth and breadth of utility as Apple.

Meanwhile, there's much speculation that Peloton will be acquired by Apple (although that's more wishful thinking than any strategic intent from Tim Cook). Other potential brands that might like Peloton in their portfolio include Amazon, Nike, Apple or Google.

The thing these brands all have in common is that they value our attention. And build products to get it.

Sources: Wired, MSN, Protocol


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