peloton-business-model

Peloton Business Model In A Nutshell

Peloton is a media and exercise equipment company primarily making money making money via its fitness products (indoor cycle with a touchscreen monitor with a base price of $1,895, also known as the Bike Basics package). Other packages are also available, including the Bike Essentials ($2,045), Bike Works ($2,145), and Bike Family ($2,345).

Background

Peloton is a media and exercise equipment company founded in 2012 by Graham Stanton, Hisao Kushi, John Foley, Tom Cortese, and Yony Feng.

Peloton sells stationary bicycles and treadmills that enable customers to remotely participate in exercise classes streamed from Peloton studios. Due to the COVID-19 pandemic, this form of remote physical exercise has become extremely popular.

But in the early days of Peloton, John Foley spent three years pitching the idea to thousands of investors. He was largely unsuccessful, securing a small amount of capital through angel investors only. However, the idea gained major traction when customers were given the chance to ride the bike in a class scenario. A retail store selling bikes soon followed.

Today, the company has over 3 million subscribers with 1 million of those being connected fitness subscribers. By the end of 2021, these numbers are expected to double.

Peloton revenue generation

Peloton makes money from three distinct sources. Let’s take a look at each.

Fitness products

The first and most obvious revenue source is fitness products. Peloton sells an indoor cycle with a touchscreen monitor with a base price of $1,895, also known as the Bike Basics package.

Several other packages are also available, including the Bike Essentials ($2,045), Bike Works ($2,145), and Bike Family ($2,345). These options offer the same indoor cycle with a host of accessories including riding shoes, a drink container, weights, headphones, and a heart rate monitor.

The company also sells a treadmill called the Peloton Tread. Like the indoor cycle, this also comes with a touchscreen and the ability to purchase added features. Peloton charges $2,495 for the Tread Basics package and $3,065 for the most expensive Tread Family package.

Both the indoor cycle and treadmill represent a significant source of income for Peloton. Some suggest the profit margin on these products is as high as 43%.

Apparel and accessories

Peloton also sells fitness clothing under the Peloton Apparel brand, including gym bags, hats, leggings, and t-shirts.

This is a relatively small revenue generator for the company, but sales are growing at a year-on-year rate of 53%.

Subscriptions

While Peloton customers are exercising, they can purchase a subscription to exclusive sports content streamed directly to their monitor.

Here, there are two choices. The customer can either join a live class or choose from Peloton’s vast content library. In either case, the customer can view their progress against other program participants.

Peloton charges $39/month for the service, which it notes is a comparable price to a boutique fitness class run by Flywheel.

For those desiring a similar yet more affordable option, the Peloton Digital Membership is available for $12.99/month.

Key takeaways

  • Peloton is a media and exercise equipment company founded in 2012. The idea for Peloton was deemed unviable for years until customers were allowed to test it in practice. A general shift toward remote exercising has strengthened the already successful Peloton concept.
  • Peloton makes a significant amount of money through the sale of treadmills and indoor cycles that have very high-profit margins.
  • Peloton also makes money selling fitness apparel. This is a very small revenue stream at present, but with 53% year-on-year growth there is also high potential. Customers can also pay for a subscription to join live classes or choose from a vast library of exercise content.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"