Many would argue that the price of a Peloton Bike or Tread alone is steep enough. To then to add a monthly fee of $39 on top of that might seem like robbery. Peloton appears to be doing well in regard to the sales of its fitness machines. So why exactly does the fitness company offer subscription-based workouts? The answer is simple economics.
Peloton subscriptions guarantee cash flow
Due in large part to a global pandemic in addition to quality products, Peloton saw a 232% increase in sales this quarter and is expected to haul in nearly $4 billion in 2021 according to CNBC. While a majority of Peloton’s income stems from sales of its machines alone, that may not be the most sustainable business strategy in the long term.
Peloton Bikes range in purchase between about $1,900 to $2,500, while Treads can go as high as $4,300 each. While these sales bring in tons of cash for the fitness manufacturer, they are generally a one-time purchase for customers. That, on top of the fact that they require little to no maintenance, leaves something to be desired for future monies from current customers. That’s where subscriptions come into play.
Add a subscription service on top of the equipment purchase, and Peloton has continued cash flow from its customers instead of a one-and-done sale. It’s important to give Peloton credit here, too. Their subscription model isn’t just a greedy cash grab.
Peloton subscriptions offer value via content
Content is the name of the game these days. We consume it relentlessly through a multitude of various platforms. Connected fitness is simply one of its more nascent forms.
Peloton’s focus on both quality and quantity in its fitness content helps justify the subscription model for its customers. Much like your monthly Netflix subscription gives you a seemingly endless library of media to choose from, Peloton offers a vault of over 10,000 cycling workouts. Not to mention it offers over a dozen live classes every single day.
As for Tread and Tread+ users, the same subscription fee gives customers at least eight live classes a day. Those are also recorded and added to the growing library of thousands. For a fee, this gives Peloton members 24/7 access to live and pre-recorded original content to fit any workout, large or small.
In addition to the $39 all-access membership, Peloton also offers a digital membership for $12.99 month. This membership requires no Peloton equipment, but still gives customers access the the workout library on their phone, tablet, TV, or browser. This is an excellent example of how Peloton is utilizing its premium original content to siphon additional income.
Peloton subscriptions outlast equipment purchases
Customers come to Peloton for the state-of-the-art fitness equipment, but they stay for its content. Peloton requires a subscription so it can continue to generate money from customers long after they have paid off their Bike+ or Tread.
Peloton has been wise enough to generate and share fitness workouts for multiple machines, on multiple platforms to fit any and all fitness needs. Due to this focus on effective and diverse content, everyone wins. The customers receive access to any and all fitness programs as they expand in number and scope. At the same time, Peloton receives continuous cash flow for its content, regardless of whether a given customer is still paying for their machine(s).
Peloton equipment, at its current price point still accounts for a majority of the money coming in. However, as more and more people purchase machines and subscribe to the growing content, it just may be the subscriptions themselves that generate the majority of the company’s income someday.