{"id":15309,"date":"2016-11-16T23:04:54","date_gmt":"2016-11-17T04:04:54","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/peloton\/"},"modified":"2016-11-16T23:04:54","modified_gmt":"2016-11-17T04:04:54","slug":"peloton-fitness-studios-netflix-blockbuster","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/peloton-fitness-studios-netflix-blockbuster\/","title":{"rendered":"Peloton : Fitness Studios :: Netflix : Blockbuster"},"content":{"rendered":"

Imagine a spin class with a world-class instructor, but instead of schlepping yourself (and your bag) to the gym and dealing with 20 sweaty, smelly classmates, you get a high-intensity workout in the comfort of your own home. Peloton has made this fantasy a reality.<\/p>\n

Existing Fitness Studio Business Model<\/p>\n

In recent years, we have seen a proliferation of niche, high-quality fitness studios, with health club revenues topping $24 billion last year. Marquee brands include SoulCycle, Flywheel, Barry\u2019s, and a host of others. Personalized fitness studios now make up more than 40% of the market, with over 20 million people in American belonging to a boutique or discipline-specific facility[i]<\/a>. No company better epitomizes the trend to discipline-specific studios than SoulCycle. With 50% year-over-year growth, the company has grown to 50 studios and expects to IPO soon[ii]<\/a>. SoulCycle\u2019s strategy is to buy (or lease) expensive real estate in major urban centers and charge upwards of $30 for 40 minutes on a stationary bike[iii]<\/a>. During the class, high tempo music blasts as an instructor motivates a room full of attendees. Unfortunately, classes are offered at specific times and often fill up quickly. Worse yet, if you do get in to a class you may end up in the back of room, where you cannot see the instructor. The Unbreakable Kimmy Schmidt<\/em> captures this dilemma of being stuck in the back of the room best:<\/p>\n

https:\/\/www.youtube.com\/watch?v=pSexyQeD_vA<\/a><\/p>\n

Digital Transformation Disrupts the Existing Model<\/p>\n

To address the issues stated above, Peloton developed a stationary bike with a 22-inch, 1080p full HD tablet mounted to the handlebars that allows members to partake in a live stream of a class or select a variety of on-demand sessions. At the end of each session, the tablet provides you data on calories burned, distance traveled, overall revolutions per minute, and your ranking compared to other Peloton members in that specific class[iv]<\/a>. By focusing on digital content and the user experience, Peloton increased the accessibility of spinning without sacrificing the energy of that crowded studio class session. Further evidence of the technological capabilities: Men\u2019s Health named Peloton the Best Cardio Machine in its annual ranking of fitness programs[v]<\/a>.<\/p>\n

https:\/\/www.youtube.com\/watch?v=juDkUg7Sr7g<\/a><\/p>\n

What used to require a trip to the gym or studio can now be accomplished in your living room or in-home gym thanks to the digitalization of the studio class. In addition, you don\u2019t have to compete for a class time or miss a class due to traffic \u2013 the Peloton bike is always available at your home and on your schedule. Despite a retail price of $1,995 and $39\/month subscription, the company has sold 40,000 bikes and expects revenues to exceed $150 million this year.[vi]<\/a><\/p>\n

A Better Business Model<\/p>\n

In terms of business model, the Peloton is to Soulcycle what Netflix was to Blockbuster. \u00a0As opposed to spending money on real estate, hiring instructors, and maintaining a brick-and-mortar operation, Peloton employs a few instructors broadcasting live streams to members across the world. With minimal fixed costs, superior technology, and a recurring revenue subscription model, Peloton is clearly a superior business model. The most significant evidence of SoulCycle struggling to deal with Peloton is the fact that the company has continually delayed its IPO over the last 18 months, possibly due to market share loss.<\/p>\n

\"\"<\/p>\n

Additional Steps for Peloton to Take<\/p>\n

Peloton has recently raised $30 million in new financing, which will be important as it seeks to expand its product offering. However, the company has oddly used the proceeds to build out more brick-and-mortar stores (with a total of 20 “showrooms” nationally). A more prudent use of capital would be to leverage the existing technological infrastructure and brand equity in to other machines: treadmills and ellipticals. In terms of using digital to better its existing product, I expect the company to continue to invest in research & development to bring the cost down to a more mass-market level. As the first-mover who has truly figured out how to combine digital technology with exercise, Peloton will attract many copycats. In the end, competition will be good for consumers. I look forward to the day when we can all get a world-class workout experience in the comfort of our own home.<\/p>\n

Words: 697<\/p>\n

[i]<\/a> http:\/\/www.marketwatch.com\/story\/boutique-fitness-studios-showing-the-most-growth-in-the-health-club-industry-2015-09-16<\/p>\n

[ii]<\/a> http:\/\/www.bloomberg.com\/news\/articles\/2016-05-19\/soulcycle-ceo-focuses-on-growth-as-ipo-plan-in-holding-pattern<\/p>\n

[iii]<\/a> http:\/\/www.forbes.com\/sites\/clareoconnor\/2015\/07\/31\/as-soulcycle-preps-for-ipo-stats-show-boutique-fitness-isnt-just-a-fad\/2\/#187d61427ec6<\/p>\n

[iv]<\/a> https:\/\/www.pelotoncycle.com\/press<\/p>\n

[v]<\/a> http:\/\/www.menshealth.com\/fitness\/2015-fitness-awards<\/p>\n

[vi]<\/a> http:\/\/fortune.com\/2016\/06\/18\/peloton\/<\/p>\n

Media Links:<\/p>\n

 <\/p>\n

Youtube<\/p>\n

http:\/\/www.digitaltrends.com\/android\/peloton-bike-brings-studio-classes-into-the-home-with-android-tablet\/<\/p>\n","protected":false},"excerpt":{"rendered":"

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