PTON - Peloton

[merkhet]

What people don’t understand when they criticize this company’s products as “a bike with a screen on it” is that exercise—particularly cardio—has a big motivation hump for the individual. It’s absolutely essential that the person exercising makes a regular habit of it, but very hard to achieve. It’s why most bikes end up as drying racks...

Peloton addresses that beautifully as the anecdotes on here indicate. And no, Nautilus or one of the copycats will not be as effective at achieving this.

There is a moat here.

At some point I would have said that this company would have been the perfect target for AAPL with all its cash on hand and a significant overlap in customer base, but I do not think Cook is visionary enough to see it. Would certainly do better than the Beats acquisition.

+1

I have also been musing over whether Nike should try to own this. I can see a world in which Peloton heavily branches into apparel over time.

[Castanza]

This reminds me of Herbalife. The shorts are all cheap introverts and don't understand that most people need human reinforcement, eg a coach or a class to lose weight.

Look, Peloton is not a new concept. It's simply not. There have been workout videos and home workout equipment since at least the dawn of Television.

Someone please show me the long-term use statistics on these home exercise pieces of equipment/videos.

And I'll grant you that most people need human reinforcement, such as a coach or a class. How many exercise studios are there out there? How many of them earn an economically significant/attractive return to their owners/operators? Would you want to compete against an irrational competitor? That's pretty much what Peloton does because their competition is constantly evolving with new fads (Barre, OrangeTheory, Spin, Crossfit, Yoga, Pilates, Insanity, Resistance Band Training, Zumba, Jazzercise, the Shake Weight, and the list could go on and on). That's a very competitive environment where market share changes quickly. If there is one thing I've learned, a business is much less likely to providing enduring investment returns if market share in that industry changes at a rapid pace (meaning relative market shares can move dramatically over the course of a decade). I think exercise equipment probably witnesses dramatic changes in customer behavior on a more frequent pace than that.




 https://www.youtube.com/watch?v=kK_zBEJRMmE

The difference is Peloton is quickly becoming a cultural status item like the iPhone did. The branding/marketing difference is unreal. Those previous exercise equipment fads have a stigma of becoming nothing but clothes hangers that you hide in some backroom of your house. Peloton is something you put in a front room so every friend who comes over sees your big dick swinging Peloton "piece of art" and thinks to themselves, "damn, what am I doing wrong". Add in the best in class platform and you may have a recipe for success. As I said, no position currently. But I think there is more to consumer perception with PTON than people are giving credence.

[KJP]

Peloton is something you put in a front room so every friend who comes over sees your big dick swinging Peloton "piece of art" and thinks to themselves, "damn, what am I doing wrong". Add in the best in class platform and you may have a recipe for success.

From this perspective, is the (to me at least) high cost of Peloton a feature, rather than a bug?

[Castanza]

Peloton is something you put in a front room so every friend who comes over sees your big dick swinging Peloton "piece of art" and thinks to themselves, "damn, what am I doing wrong". Add in the best in class platform and you may have a recipe for success.

From this perspective, is the (to me at least) high cost of Peloton a feature, rather than a bug?

I would guess that it is a feature. You can find other exercise equipment (see sunny bike) which is very similar mechanically, yet costs about 1/3rd of the price.

[misterkrusty]

"The shorts are all cheap introverts and don't understand that most people need human reinforcement, eg a coach or a class to lose weight."

Now this is the sort of genius-level insight that makes CoBF so great.  People need human reinforcement?  Arghhh!  Why didn't I realize that before?  Now I see that Peloton's $2,250 bike is the only way to get human reinforcement ... unless you own a different bike and subscribe to their  TV-production-quality classes for $12 a month. 

When I see that big-swinging-dick piece of art in my friend's living room I just pull an American Psycho and think "I am overcome with a wave of jealousy.  Tom's exercise bike is clearly more expensive than mine..."  If only my exercise options were confined to my home ... if only I could be that glorious hamster on a wheel ... if only my quads were the only muscle group that mattered...

I ain't one of those losers who think current sales are a function of everyone being stuck at home.  Don't they see it's so much more than that?  Thanks to y'all, I "get it"

[Kaegi2011]

"The shorts are all cheap introverts and don't understand that most people need human reinforcement, eg a coach or a class to lose weight."

Now this is the sort of genius-level insight that makes CoBF so great.  People need human reinforcement?  Arghhh!  Why didn't I realize that before?  Now I see that Peloton's $2,250 bike is the only way to get human reinforcement ... unless you own a different bike and subscribe to their  TV-production-quality classes for $12 a month. 

When I see that big-swinging-dick piece of art in my friend's living room I just pull an American Psycho and think "I am overcome with a wave of jealousy.  Tom's exercise bike is clearly more expensive than mine..."  If only my exercise options were confined to my home ... if only I could be that glorious hamster on a wheel ... if only my quads were the only muscle group that mattered...

I ain't one of those losers who think current sales are a function of everyone being stuck at home.  Don't they see it's so much more than that?  Thanks to y'all, I "get it"

I think you're being too dismissive.  NObody saw the pandemic, but it is what it is, and in this instance I see two factors that dramatically impact their business:

1) CAC goes way down, because people are coming to them organically, and even with advertising the CPMs are way lower than before.  Assuming LTV has not changed, each incremental customer is that much more valuable.

2) I would argue that LTV is probably increasing at the moment.  When people need an outlet to exercise, and they experiment and **stick** to a routine such at the bike/app that they otherwise might not have and see the results, they might be more inclined to subscribe longer. 

If you believe those two facts, plus runway to profitability, you might get comfortable with the stock price.  Now I wish I had the foresight to invest, but I do believe there are good reasons for the stock to have done what it's done. 

[Broeb22]

Peloton is something you put in a front room so every friend who comes over sees your big dick swinging Peloton "piece of art" and thinks to themselves, "damn, what am I doing wrong". Add in the best in class platform and you may have a recipe for success.

From this perspective, is the (to me at least) high cost of Peloton a feature, rather than a bug?

What you just described is a Giffen good, a luxury item. If that is what you're arguing, then how wide can the adoption really be? How many people are in the Fuck You Money Expensive Equipment Market? What % of the available market has already tried and failed with purchasing expensive exercise equipment? Will the churn for each new customer, who I would guess is less likely to be a passionate cycler, remain at its current level or increase over time?



I would guess that it is a feature. You can find other exercise equipment (see sunny bike) which is very similar mechanically, yet costs about 1/3rd of the price.

[thowed]

I mostly just look on with a mix of admiration, disgust, and confusion.

I don't know if you've read Adam Smith's 'The Money Game' but he covered all this stuff in the mid-70s.  It's Gerry Tsai all over again.  We need some kids to understand it for us.

[misterkrusty]

Ahh yes, the "Valuesaur Museum" ... that's a sore subject for me because I was told back in 1999 that I was to be dunked in formaldehyde and featured prominently in one of the main exhibits.  And then in 2002 they call me and say sorry not gonna happen.  Bastards!

Oh that sweet, sweet subscription revenue.  At $12/month less production costs it might wind up being some small amount of profit.  But, if you have the "vision" to capitalize that at a visionary multiple, you might wind up exceeding the current $12 billion market cap. 

Just curious, were any of you guys in FBIT or GPRO?  be honest

[KJP]

Ahh yes, the "Valuesaur Museum" ... that's a sore subject for me because I was told back in 1999 that I was to be dunked in formaldehyde and featured prominently in one of the main exhibits.  And then in 2002 they call me and say sorry not gonna happen.  Bastards!

Oh that sweet, sweet subscription revenue.  At $12/month less production costs it might wind up being some small amount of profit.  But, if you have the "vision" to capitalize that at a visionary multiple, you might wind up exceeding the current $12 billion market cap. 

Just curious, were any of you guys in FBIT or GPRO?  be honest

I doubt they expect the $12/month subscription to be a standalone business.  There already are competing streaming workout services at similar prices, e.g., Beachbody on Demand, and, as you suggest, likely little moat in solely that type of business.  But if you already produce a bunch of content for people paying $40/month, then making some it available for $12/month would be largely high margin incremental revenue, so long as it doesn't cannibalize the $40/month product and so long as you keep your CAC under control.  It would be akin to a car dealer selling gap insurance -- you'd be unlikely to sell that standing, but you do it when you sell it at very little incremental cost to your main business.