Interview Synopsis

Peloton Interactive - IPO filing analysis

  • Public Equity
  • Consumer
  • North America

As US equipment and media company Peloton tees up for its imminent IPO – expected to be one of the biggest of the year – Third Bridge Forum interviewed a VP of operations at competitor Flywheel Sports to discuss how the fitness and cycle industry is shaping up. He also looked at current threats facing Peloton, its pricing and customer spend and the repercussions of its current litigation case.

Disruptive Forces in the Fitness Market as Peloton Awaits IPO

The VP warned that while the fitness market is growing, the cycling boutique space is reaching a saturation point, with cycling in the urban centres hitting the maximum threshold. However, the Flywheel employee, who specialises in long-term strategic planning, believes connected at-home fitness remains healthy with consumers still buying into the trend. 

The biggest threat to Peloton is the aggressive entry by competitors. With knowledge that Apple is set to enter the fitness and wellness sector, the VP said this could be a massive danger to Peloton as the tech giant could well enter with a more efficient and cost-effective model. 

The VP explained competitors like Apple could introduce an integrated media platform that does away with the proprietary hardware concept that Peloton relies on – potentially flipping the game on its head. 

In the medium to long term, lower cost competitors such as NordicTrack, Echelon and Technogym are also likely to cause a problem for premium players like Peloton, according to the Flywheel VP, especially as they can get recurring revenue from lower-income customers. 

This led us to the question of Peloton’s pricing and target customer base. The Interview debated whether Peloton’s customers have the discretionary income to make a big purchase like a $2,000 Peloton bike. The Flywheel employee thinks there are some doubts here, given that Peloton’s biggest customer base would be debt-ladened, 20-somethings. 

The VP also discussed Peloton’s customer acquisition costs – stating it could be as high as $1,000 per customer. With more competitors coming into the market, the company’s marketing spend could keep rising, the interviewee said. 

Peloton’s current litigation case with the National Music Publishers’ Association is also an ongoing concern, with the VP adamant there is “more to come”. Viewing Peloton’s decision not to settle with the NMPA as a major mistake, the specialist believes a long, drawn out lawsuit will hurt Peloton’s reputation – which could be a problem as the firm looks to expand internationally. 

To access all the human insights from Third Bridge’s Peloton Interactive – IPO Filing Analysis Interview, click below to view the full transcript. 

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