Payments And Peloton’s Plans To Go ‘Beyond The Bike’

Peloton's Role In Subscription, IoT Evolution

Despite consumers’ best intentions, exercise is hard.

Not only do people have to find the energy to actually work out, but gyms can be inconveniently located or have high pricing—and some people just don’t like working out with others. And those non-gym-goers don’t want to have to brave a downpour or bitter cold just to get a workout in.

That’s what Peloton is betting on.

The home fitness provider, which just filed for its initial public offering (IPO), combines its own hardware, software and subscription model to try and win over exercise-minded consumers – an effort that could shed light in the coming few years on the development of the Internet of Things (IoT) and the future of connected devices. In a new PYMNTS conversation, Karen Webster and Dan Burkhart, CEO at Recurly, a subscription payments service provider, discuss how Peloton fits into the larger world of digital payments and commerce.

New Path

As Burkhart told Webster, the company is blazing a new, high-profile trail of combining hardware with potentially higher-margin software and subscription services. “I imagine there will be a really interesting cohort of new startups that will be taking inspiration from Peloton,” he said.

Peloton is best known for its exercise bikes and treadmills that have screen peripherals to provide for streamed workout classes. The company was the first to combine bikes and treadmills with screens that let people participate in fitness classes with others from their own location. The company said it wants to allow people at home to enjoy a workout experience “as physically rewarding and addictive as attending a live, in-studio class.”

The company, which was founded in 2012, has filed paperwork with regulators ahead of an expected IPO. Sales in the company grew 110 percent to the tune of more than $900 million, from $435 million in fiscal year 2018. This year, Peloton’s net loss reached $245.7 million, growing from $47.9 million the year before. The company said it will raise around $500 million when it goes public, and that it will expand outside of the United States. That move, the company said, will bring additional costs.

IoT Growth

No matter what happens in the coming months with those financials, Peloton is providing glimpses into how IoT is evolving and will continue to evolve as more connected devices hook up to the web and each other. “The Internet of Things is really allowing for this wonderful expansion of connected devices,” Burkhart said.

Right now, those devices are mainly – or at least mainly in mainstream perception – appliances, home security protections and voice-activated speakers. But the rise of Peloton helps to demonstrate the wider possibilities of the IoT future – one that is certain to include connected cars and trucks, among other technologies.

Companies such as Peloton also demonstrate the importance of providing a full, even holistic, consumer experience no matter the situation, according to Burkhart. That’s because of the virtual classes and other such options available through the Peloton service, where users can give virtual high-fives to each other and even work out with distant friends, he said. There is something about peer pressure and the competitive spark that can encourage better workouts, he pointed out, and Peloton has tapped into that. “You have the upfront sale and ongoing engagement with customers,” is how he described it to Webster, reflecting one of the enduring ideals of payments and commerce.

For now, of course, Peloton users are tied to the company’s hardware and software – this is no Netflix or Hulu-type service that can be accessed via any mobile device. Price, too, is a big factor: The bikes aren’t cheap. Look online and you’ll see they fetch $2,000 or so. The treadmills do, too; some of them are more than the bikes. The subscriptions cost roughly $20 or so a month, depending on where you look. But the success of such a company will tell much about the future of subscriptions and hardware-and-software combinations such as the ones offered by Peloton.

And that’s not all.

“Subscriptions can help subsidize the software,” Burkhart said when thinking about the future of this company and its particular business model. As well, he said the goal of Peloton was not necessarily the company’s goal — and that the company stands as one of the best ongoing models of subscription commerce.

Get on those gym clothes and prepare to sweat — Peloton could play a part in showing what works, and what might not work, with subscriptions and the Internet of Things.