Last week’s Q1 2024 earnings call revealed that lululemon is paying Peloton millions of dollars for their content through a revenue sharing agreement – specifically about $10 million in Q2 alone.
As a refresher, Peloton and lululemon announced their global strategic partnership on September 27. lululemon has become Peloton’s primary apparel partner, and Peloton will become the exclusive digital fitness content provider for lululemon. This partnership was announced almost exactly one year after Peloton and lululemon settled their ongoing lawsuit.
As indicated via the original announcement, the partnership entails that Peloton is the “exclusive digital fitness content provider for lululemon.” It turns out this arrangement comes with a revenue sharing benefit in which lululemon will pay Peloton millions of dollars to obtain access to Peloton classes for their Mirror owners.
During last week’s earnings call Peloton was explicitly asked how the partnership with lululemon may impact the overall business. CEO Barry McCarthy responded:
“In terms of lululemon, that’s live. And we are benefiting from it as we speak. So, actually nothing more to say about the economics of that on a go-forward basis.”
Peloton Chief Financial Officer (CFO) Liz Coddington added:
“Yes, the one thing I can add on lululemon is that we just started having our content available for the lululemon Studio members who have a mirror that actually went live yesterday on November 1st. And so, as far as receiving the revenue sharing benefit from that agreement that we have with lululemon, that started effective in November. And we expect, roughly to give you a sense of the size for the quarter, roughly about $10 million of revenue for Q2 coming from that subscription revenue for us.”
As of November 1, 2023, lululemon Studio All-Access members – i.e. those who own a Studio Mirror device – have access to Peloton content through their existing luluelmon membership. Studio Mirror owners will be able to stream Peloton content directly on their device – in place of the lululemon content they had previously been receiving. Moreover, lululemon will stop selling the Studio Mirror by the end of 2023, but will continue providing support to existing device owners.
Coddington’s comments explain that Peloton will receive approximately $10 million from lululemon in Q2 alone to grant Mirror owners access to Peloton’s classes.
In addition to the partnership terms outlined above, Peloton instructors Erik Jäger, Hannah Frankson, Adrian Williams, and Chelsea Jackson Roberts are serving as lululemon ambassadors. The two companies celebrated the launch of the partnership with four events during the Peloton on Tour Chicago weekend, and emailed all Peloton members a lululemon discount code. The first drop of the collection was released on October 11, 2023.
For all the news related to Peloton’s most recent earnings call, check out our overview article.
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This move is good for Peloton but quite a downgrade for Lululemon. The Peloton content is not optimized to be seen through the mirror (might as well use a tv). The Lululemon users are paying “full access” for only some of the fitness contents that Peloton provides. Does not include running, rowing, biking or Peloton gym. There is no mechanism for a Lululemon subscriber to become a full Peloton user (currently they will need to pay double). Lululemon users can’t see Peloton live classes.
Completely agree. If Peloton wanted to increase business, so should offer an upgrade path for Mirror customers. A discount on hardware, and a combined subscription to allow use of Mirror and Peloton devices.
Having to pay two memberships is actually a deterrent from committing to the Peloton ecosystem.