Peloton revamps equipment, raises prices ahead of holidays

Peloton on Wednesday said it’s relaunching its product assortment, introducing a commercial equipment line and raising prices for both subscriptions and hardware as the company looks to reignite growth ahead of the holiday shopping season. 

The revamped assortment includes better audio, processors and WiFi across all of its machines. Its refreshed plus line will feature an AI-powered tracking camera, speakers, a 360-degree swivel screen and hands free control, among other new features. 

“The products are called the cross training series because we’re trying to help our members … understand that the right regimen for everyone, right routine for everyone is a mix of cardio and strength, and also investing in practices like yoga and meditation,” CEO Peter Stern told CNBC in an interview. “And so the products were designed, regardless of which one you buy, to facilitate that type of multi-disciplinary approach to wellness.” 

The assortment-wide relaunch, the first since the company’s founding, comes as Peloton looks to return to sales growth after spending the last couple of years fixing its cost structure and staving off financial ruin. Now that the company has refinanced its debt and is again generating free cash flow, it is now focusing on its assortment in the hopes a better line up can bring in a wider swath of members.  

“The products are going to be more expensive than the ones that we had before, but I think deliver a lot more value because now you’re getting a strength and a cardio solution,” said Stern. “Our holiday season is about to be upon us. We sell over 60% of the units across the whole year [during the holidays]… we’ll get a pretty clear sense of whether we’re hitting the mark in the next few months based on new people that we attract with this cool new stuff, and how we impact the behavior of existing members.” 

Fitness junkies are increasingly prioritizing a combination of cardio and strength in their routines. That can be difficult with some of Peloton’s original machines because the screen doesn’t move and it can be clunky to switch between different types of classes.

Advertisement

Nick Caldwell, Peloton’s chief product officer, said the revamped assortment seeks to address those issues and other common complaints with the original lineup. 

“We’ve integrated our largest swivel screen across the entire plus line, 360 degrees of movement. It’s built for seamless transition from your cardio to different workout types. You can step off the Bike, Tread or Row, turn the screen, and you’ve got a front row view for strength, yoga, stretch or mobility work,” said Caldwell during a presentation at Peloton’s New York City studio. “We’ve also added voice control. You can adjust weight, skip moves, pause all with your voice, no more fumbling around with buttons while you’re trying to enjoy your workout.” 

Those improvements will come with a higher price tag, which is welcome news to some on Wall Street that have said Peloton has taken too long to adjust its pricing. Most of its hardware will go up in price by a couple hundred dollars each, and its membership costs will rise, too. Peloton’s all-access membership will increase from $44 to $49.99 per month, its App+ will increase from $24 to $28.99 a month and its App One will rise from $12.99 to $15.99 per month.

Here’s how much its hardware prices will increase:

• Bike: $1,695, up from $1,145
• Bike+: $2,695, up from $2,495
• Tread: $3,295, up from $2,995
• Tread+: $6,695, up from $5,995

Peloton’s original Row, priced at $3,295, will be replaced with its new Row+, which will cost $3,495.

Peloton’s priorities have evolved in the last few years. Its machines have faced product safety issues and have long dragged on Peloton’s profitability because they’re expensive to make and a limited number of consumers are willing to buy them. Under former CEO Barry McCarthy, a former Spotify and Netflix executive, the company shifted focus away from its products and instead tried to build a business around its app, which failed to bring the growth management wanted. 

Now, Stern, who co-founded Apple Fitness+ and previously oversaw Ford‘s subscription services, aims to upgrade Peloton’s products in an effort to match its wide range of class types with its hardware.

Beyond revamping its direct-to-consumer business, Peloton is also unveiling a new commercial equipment line of more durable versions of its existing hardware.

The Peloton Pro Series includes commercial versions of its Bike+, Tread+ and Row+ and will be marketed to places that have small gyms, like hotels, apartment buildings, corporate wellness centers and country clubs. 

Advertisement

In recent years, Peloton has tried a few different strategies to build out the commercial side of its business through partnerships with hotels and universities. It’s now one of the faster growing parts of the business, said Dion Camp Sanders, Peloton’s chief commercial officer. 

Still, some industry critics have said Peloton’s equipment isn’t appropriate for gym settings because the machines can’t handle higher frequency use, which prompted the company to create a more durable lineup. It also recently created a new commercial business unit, which combines Peloton’s offering with Precor, the fitness equipment company it acquired in 2020. 

“That enables us to offer a pretty broad assortment of commercial fitness equipment and serve a broad set of … needs, both heavy use environments as well as lighter use environments,” said Camp Sanders. “We feel like it’s a pretty unique offering because we’re able to bring the best of Peloton’s aspirational experience across software and content … as well as the reliability, durability, quality that you get with Precor and Precor’s capabilities around service and repair.” 

While revenue across Peloton was down in its most recent fiscal quarter, its commercial business unit has already returned to year-over-year growth and is expected to make up a larger percentage of total revenue over time, said Camp Sanders. It’s also a crucial marketing tool for the company, he added. 

“Peloton equipment in hospitality settings are the most productive source of trial and lead generation for our consumer business. So a consumer may first encounter a Peloton in a premium hotel, take a ride, fall in love with the experience, and then they come into our system,” said Camp Sanders.

“Once we start to put Pelotons in more and more commercial environments, we believe it can become a great, almost tip of the spear way to introduce consumers to the Peloton brand in more and more places, and then that can help us pull the consumer business along.”