CEO: Peloton Struggles to Shift Consumer Perception Despite Rebranding

Despite Peloton’s rebranding effort launched in May 2023, executives acknowledged in the latest earnings call that the company’s expanded offerings and new identity have yet to fully resonate with consumers.

During last week’s fourth-quarter earnings call, Interim Co-CEO Karen Boone addressed this topic.

“I’d say there are still a lot of people who think about us as a bike and/or cardio company,” Boone said. “We have 16 modalities, but not everyone knows all the modalities we have. We’re really excited about Tread and Running, but also the content, the experiences, and run clubs and social features that we’re thinking about. We’re really bullish on strength. There’s so much of a movement toward strength. I think people understand the science behind it and why it’s important. It is the No. 2 modality for us, but I still think there’s a lot of people who come for the cardio and then understand the strength.”

Shifting Focus

Peloton’s rebranding efforts focused on shifting its image from a niche in-home bike company to a comprehensive fitness provider for all levels and locations. Alongside the brand refresh, Peloton introduced new app membership tiers: a free option with over 50 classes, an App One tier at $12.99 per month for extensive access, and an App+ tier at $24 per month for full library access and exclusive content.

“We’re not yet known for strength,” Boone told investors. “I think you’ll see with the beta tests we’re having, with other things we’re planning to make sure that’s better understood and more well known. I think you’ll see that as more of a white space for us in the future with new members and even kind of going deeper with our existing members. And then, I think there’s more we can do just with broadening beyond just fitness over time.”

Peloton’s paid connected fitness subscriptions decreased by 75,000 to 2.98 million in the fourth quarter, despite some gains from retail channels. The company also experienced a significant drop in paid app subscriptions, which fell by 59,000, ending the quarter with 615,000.

While company officials are “looking at all of the pricing across the business,” Boone said, “there are no plans right now to increase our subscription price. On the hardware pricing front, it’s easier to think about what we might do in certain markets, especially where the penetration of third parties such as international is more significant. There are certain markets where we’re entirely third-party distributors.

“And so, the margins there need to be a little bit higher to support those,” Boone added. “Looking at the unit economics across all products and across all channels, right now, the subscription margins are quite good. It’s the hardware margins that are a little more challenged. It doesn’t mean that we won’t ever entertain a subscription price increase, but it’s not something that we’re planning for any time in the immediate future.”

Moving Forward

During the fourth-quarter earnings call, Interim Co-CEO Chris Bruzzo said things like strength, Tread and efforts to become more focused in marketing “where we build up demand before we try to deliver it via promotions, all these things are made possible because we’re putting the company on solid financial footing. We said in our remarks we’re planting the seeds here for growth. And some of these seeds will take some time.”

Bruzzo agreed with Boone’s take on brand perception.

“We’ve got to change that perception that it’s only about the bike, that it’s actually also about strength,” he said. “In fact, strength is our second most popular way of exercising with Peloton. It’s also about running, and we’re doing some very cool stuff around Pace Targets and running content. We’re very excited about those things, and we think they create lots of white space for Peloton, but it will take time to develop.”