The other day, I took an indoor cycling class.1 It was the standard fare. The instructor's abs very toned and very intimidating. She pumped the jams and proceeded to launch a brutal attack on my hamstrings and quads. She shouted out catchy one-liners like "Mind over matter, muscle over matter. Boom!" and, my personal favorite, "Get breathless!" And she called out people's names and applauded top performers. No, I wasn't one. But I was trying, okay?
At the end of 45 minutes, I was indeed breathless. I was also super hungry. So I hopped off the bike, hobbled into my kitchen, and made some dinner. Oh yeah, all this was happening in my apartment.
That's thanks to a new fitness company called Peloton that manufactures and sells internet-connected indoor bikes, which allow users to stream live classes from home. The bike comes complete with a large, waterproof, touchscreen tablet, engineered by Peloton, on which users can tune into live classes, watch classes on demand, and interact with other cyclists by video chat. During live classes, the instructor sees a leaderboard of everyone who's tuning in remotely. She can watch their metrics and call people out by name to give them the feeling of being in-class. Those overachievers in my class? They were from all across the country.
Today, Peloton has thousands of users in 14 countries, and yet, it has just one brick and mortar studio. A company like SoulCycle, by contrast, has 32 studios across the country. That's 32 facilities to pay for, 32 staffs to employ, 32 rents or mortgages to pay. Make no mistake, SoulCycle is a thriving business with thousands of members, a fanatical following, and millions in revenue. And yet, Peloton, which just launched this year and has raised over $14 million in funding, is betting that by leveraging technology, it can leapfrog even entrenched brands like SoulCycle and achieve the kind of scale you can rarely get in person.
This approach has a lot to do with the fact that John Foley, Peloton's founder and CEO, spent his career building brands online, where massive scale is king. He was president and CEO of Evite.com and most recently president of Barnes & Noble's e-commerce division. He started working on Peloton in 2012 after seeing the cycling boom take off, led by companies like SoulCycle and Flywheel. And though he'd never worked in the fitness industry before, he figured that using technology, he could bring the rush of these new classes into people's homes. Make that a lot of people's homes.
"What people love about these classes is the content, the experience, not the bike itself," he says. "I thought: 'Wow, what if we made a bike that brought the experience home?'"
That's one reason why Foley says he thinks of Peloton as a content company first, a consumer products company second. The bike costs $1,995, which does make it quite the luxury good. Foley admits most of his customers are "affluent." But Peloton won’t make a lot of money on the bikes, themselves. The real money-maker, he says, is the $39 a-month subscription fee users pay for access to all of Peloton’s live and on-demand classes.
"It's a gorgeous business financially," he says. "We can have a million bikes in homes and all of those people pay $39 a month, so the cost of distributing content is almost nil." What's more, he says, because people have already bought into the Peloton system for a hefty $1,995, it makes the business less susceptible to churn.
In that way, you could almost think of Peloton as Amazon for fitness, because the device is merely a vehicle to sell content. But unlike Amazon, Peloton isn't the enemy of the brick-and-mortar experience. In fact, Foley says he wants SoulCycle to continue to grow, because the more indoor cycling buffs there are in the world, the bigger Peloton's market becomes. "Once you know how good it is versus working out by yourself, you're not going to want a bike staring at the wall in your basement," Foley says, adding that the real competition are the millions of treadmills and stationary bikes sold every year.
That said, it is possible that Peloton could substantially eat into a company like SoulCycle's audience. It puts convenience front and center at a time when convenience is the ultimate selling point for consumers. And studies show this trend that's taken off with app culture is catching on in fitness as well. According to the research firm, IBISWorld, over the next five years, the amount of time consumers spend on leisure and sports is expected to decline at an average annual rate of .1 percent.
"As a result, companies, such as Peloton, will likely benefit from a large volume of time-strapped clients," says IBISWorld's fitness industry analyst Sarah Turk.
I know that was the case for me. I'll make any excuse not to go to the gym, and yes, some of them are lame. "Oh shoot, I forget to pack socks," or "Well would you look at that, it's raining outside." Often, though, it's just a matter of timing. But during the week and a half that the Peloton bike sat in my tiny bedroom, leering at me with its judgy mechanical eyes (possibly in my head) and hogging all my floor space, I was all out of excuses. I had little choice but to cop to my own laziness or hop on the bike and enjoy the ride.
1. Correction: 1:50 PM ET 11/14/14 An earlier version of this story used the term "spinning," instead of indoor cycling. Spinning is a trademark of Mad Dogg Athletics.
