This morning, the New York Times published an interview with Peloton’s new CEO, Barry McCarthy. This is the second interview Barry has granted, with the first being with the Financial Times (where, besides the interview they revealed details that the Peloton Rower is likely to release around homecoming, and Peloton has a second strength product in the works).
The New York Times interview covers a number of topics, from how he showed interest in the new job, to how his view on the company differs from John Foley’s, how he can lead Peloton and more. The entire interview is worth a read, but we wanted to highlight a few particular items from the piece.
First, Barry McCarthy talks about what makes Peloton special – whether it’s the bike or the software – and what he wants to focus on moving forward. He said:
The magic doesn’t happen in the sheet metal. It needs to be good enough, but it’s not sufficient. If it’s just NordicTrack, you’re not winning. The magic happens on the screen. That’s where the user experience is, right? It’s the music. It’s the instructors. It’s all the social aspects that we have only just begun to develop — and that’s where we’re going to spend our money.
Today, it’s a closed platform — but it could be an open platform and part of the creator economy. What other apps would you put on it? Could it be running an app store?
He recognizes that it’s the instructors, music, and classes that make Peloton magic – while acknowledging at the same time that hardware has to have a certain level of quality.
Barry mentions that “all the social aspects that we have only just begun to develop” is where they are going to spend their time & money. It remains to be seen if this could allude to creating Peloton’s own social platform, as to date all social aspects take place in Facebook groups. Or, it could refer to new initiatives like the upcoming “Fitness Flipped” Peloton podcast which is getting ready to be released.
He also notes that he is looking at opening up the Peloton platform. One frustration to many members is that while Peloton has an unofficial API, they haven’t opened it up to developers and allowed others to enhance the Peloton experience.
It sounds like Barry is thinking about taking it one level further, and allowing other companies to have their own apps or add-ons running on your Peloton screen itself, without requiring hacks or workarounds. Peloton Lanebreak, which was just released this week, could already be laying the groundwork for this – as it’s a separate app & game within the Peloton platform.
While this change to open up the Peloton platform would be a benefit to Peloton members and give them more choices, it would also help Peloton’s bottom line – as one would expect they would operate similar to the way Apple & Google’s app stores work and take a 10-30% cut of revenues & subscriptions that were made on the platform & store.
Another thing Barry is looking at is changing the current pricing Peloton model – where you pay in full for the Bike or Tread up front.
Interviewer: How are you planning to change the pricing model to strike the right balance between revenue from subscriptions and products?
Barry: Selling subscriptions with a really low entry price. Playing around with the relationship between the monthly recurring revenue and the upfront cost to find some sweet spot in the consumer value proposition that gets people to buy into the user experience and affords you a really good margin.
Interviewer: So instead of selling a bike outright at more than $2,000 and then selling a subscription, you’re thinking of selling the whole thing as a subscription, say $150 or $200 a month — like a high-end gym membership?
Barry: It’s probably, instead of $39, it’s maybe $70 or $80. And then the upfront cost is dramatically lower.
Peloton’s pricing model has been the same since it’s Kickstarter days – after your bike is paid off, you pay $39/month for your subscription.
This is the second interview in a row he has mentioned he is looking at the pricing structure. In last week’s interview with the Financial Times, he said “that “an entirely different pricing structure” could replace the $39 monthly subscription fee which has been static since the company sold its first bikes via Kickstarter.”
Barry also spoke somewhat pragmatically about the troubles the company has faced over the last several quarters, but why he thinks it is fixable:
I know subscriptions. I know consumer-facing businesses. I know growth. I know founders. I certainly know business models. And I know from my experience that product market fit is the hardest thing on the planet to find. And once you find it, it’s almost impossible to screw it up no matter how hard you try. And arguably, we’ve tried pretty hard here, but the customer love is just off the charts. The monthly churn is less than 1 percent.
You can read the entire interview with Barry McCarthy, Peloton’s new CEO, on The New York Times.
Support the site! Enjoy the news & guides we provide? Help us keep bringing you the news. Pelo Buddy is completely free, but you can help support the site with a one-time or monthly donation that will go to our writers, editors, and more. Find out more details here.
Get Our Newsletter Want to be sure to never miss any Peloton news? Sign up for our newsletter and get all the latest Peloton updates & Peloton rumors sent directly to your inbox.
I bought my bike outright. I really dislike the idea of my subscription increasing, especially that drastically. Peloton already offers a leasing program to lower the upfront cost.
If the cost goes up that much, I might as well go back to the gym where I have strength equipment too.
Looking for clarification on the new pricing structure being floated. My understanding from reading the interview is that this would be for bike/subscriptions going forward – they would be bundled as one price point vs. the current model of buying the bike/tread and a separate subscription. I do not see any indicators that this would impact current bike/subscription customers. Eventually, the subscriptions for current customers will be raised incrementally to what the analysts think the market will bear. Thoughts?
The article is definitely worth a full-read. For me, the last paragraph was revelatory – is the company a family or a sports team?