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Peloton Faces Declining User Engagement and Challenges Amid Subscriber Concerns

Fitness company Peloton is grappling with a decline in engagement, leading to a shrinking user base.

The trend has prompted Bank of America to downgrade Peloton’s rating to “underperform” due to concerns about the company’s subscriber results, Bloomberg reported Thursday (Oct. 19). The downgrade led to a 0.2% fall in Peloton’s share price after declining as much as 5.6%, according to the report.

According to BoA analyst Curtis Nagle, who reviewed three years of data for top Peloton cycling instructors, there has been a notable decrease in the number of classes taken per subscriber. This decline is seen as a clear signal of decreasing user engagement, raising concerns for the company.

Additionally, as consumers who joined Peloton’s fitness programs during the COVID-19 pandemic approach the average user lifetime of about five years, there is an increased risk of subscriber churn.

One of the primary factors contributing to the decline in user engagement is the return of people to offices and gyms following the pandemic, Bloomberg reported. With more options for physical fitness available outside the home, users may be opting for alternative workouts, leading to a slowdown in demand for at-home fitness platforms like Peloton.

Moreover, Peloton has faced challenges in recent times. The company has had to grapple with product recalls earlier this year due to safety issues with exercise bike seat posts and treadmills. These recalls have not only damaged the company’s reputation but have also eroded trust among its user base. 

The declining user engagement and the potential for subscriber churn pose a risk to Peloton’s financial targets.

“Increased churn coupled with tepid new subscriber growth also risks Peloton’s targets for positive EBITDA and cash flow which are not achievable without revenue growth or another substantial round of expense cuts,” Nagle wrote in a note to clients, per the report. 

Peloton now faces the task of finding effective strategies to reengage its users and regain their trust. 

In September, Peloton announced a partnership with lululemon in a bid to do so. 

The collaboration aimed to bring together fitness content and athletic apparel and create a combined community of over 20 million members and guests, PYMNTS reported at the time.

Under the partnership, Peloton became the exclusive digital fitness content provider for lululemon, while lululemon became Peloton’s primary athletic apparel partner, the firms said.