Commentary

Selling 'Happiness,' Peloton Goes All Out In Its IPO Filing

Peloton Interactive, the high-end purveyor of aspiration and perspiration through streaming cycling and treadmill classes, is going public. Commentators are not going any easier on it than “Robin, your instructor” does  in this 60-second spot from a few years ago.

The New York-based company filed its S-1  with the Securities and Exchange Commission on Tuesday, revealing plans to raise $500 million in its Nasdaq offering. It will trade under the ticker symbol PTON.

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“Peloton customers subscribe to the company’s digital library of fitness content, streamed live and on-demand, for $39 per month, in addition to purchasing its hardware, which costs $2,200 to $4,295 apiece. The company says 58 million workouts were completed by Peloton users in fiscal 2019, while its paying subscriber base reached an all-time high of 511,202. As for subscription revenue, Peloton reports $181 million for fiscal 2019, up from $80 million last year,” Kate Clark reports  for TechCrunch.

“Envisioning a world in which 67 million households own connected fitness equipment, Peloton co-founder and chief executive officer John Foley writes in the S-1 that ‘Peloton sells happiness,’” Clark adds.

Happiness can be as transitory as a New Year’s resolution to stick to a workout regimen, of course. And those regimens are here today and gone tomorrow

“Fitness is a historically faddish category. Exercise manias, from the Thighmaster to Tae Bo, have all come and gone. SoulCycle pulled its initial public offering entirely,” observes  Erin Griffith for The New York Times.

“For Peloton, some troublesome signs have emerged. The company’s losses have more than quadrupled in the last year. It is embroiled in legal fights over music and patents. Competitors and copycats are moving in aggressively. And the boutique spinning craze has started to wane,” Griffith continues.

“Consumer fitness for at-home use has been through any number of cycles, going back to the 1990s when you had the ab roller,” SunTrust Robinson Humphrey analyst Michael Swartz tells her.

But most past crazes have been solitary pursuits.

Abby Cuffey, executive editor of Women’s Healthtells Yahoo Finance’s Dan Roberts, Kristin Myers and Julia La Roche that Peloton’s community-building  aspects -- you can access the same class and your favorite instructor from anywhere -- gives it an edge.

“People become obsessed with their instructors. They gather these intense followings. People want to ride in their classes. It’s all about wanting to come together and experiencing this.”

Cuffey credits Peloton with opening the door for the “exploding” home fitness and exercise-class market, which includes companies such as Mirror and Hydro-Fit.

Music is a big part of the experience, too. But it literally comes at a price.

“In addition to obtaining rights to play the music on its machines, it also needs so-called ‘public performance rights’ since the music acts as a backdrop to a live-streamed class, which, in this case, is legally considered to be a live concert,” Sangeeta Singh-Kurtz writes for Quartz.

“Peloton was hit with a $150 million copyright infringement lawsuit in March from the National Music Publishers Association (NMPA) after it used over 1,000 songs by artists like Drake, Lady Gaga, Justin Timberlake, and many others, without properly licensing them. The SEC filing notes that could potentially happen again,” Singh-Kurtz reports.

“Peloton’s advertising has also gained notoriety, but for all the wrong reasons,” Ivan De Luce reminds us  in Business Insider

“Earlier this year, people took to Twitter to make fun of Peloton's ads. The glossy marketing campaign featured physically fit users cycling in modern, luxurious homes that often overlook a futuristic metropolis or expansive backyard. Oh, and their Peloton is almost exclusively positioned somewhere in the middle of the room,” he writes.

“Despite the comedic Twitter threads, Peloton's marketing team has said the campaigns were intentional and not a joke. In fact, the marketing had been intended for wealthy clientele from the beginning,” De Luce adds.

MarketWatch’s Jeremy C. Owens points out Peloton describes  itself in the IPO documents “as a technology company, a media company, a software company, a product-design company, a retail company, an apparel company and ‘a social connection company that enables our community to support one another.’”

Phew.

“Peloton’s need to support seven different companies under one roof is keeping it from turning those healthy margins into anything close to profit, however, despite earlier claims from the chief executive. The company has racked up more than half a billion dollars in losses since being formed in 2012, even as revenue has exploded higher, doubling to more than $900 million dollars in its most recent fiscal year, which ended June 30,” Owens writes.

Should the economy slide, as some, but not all, observers are warning, Peloton’s ride could be a grueling uphill ride.

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