Peloton is raising subscription fees and lowering bike and tread prices

A Peloton Interactive Inc. logo on an exercise bike at the company’s showroom in Dedham, Massachusetts, on Wednesday, February 3, 2021.

Adam Glanzmann | Bloomberg | Getty Images

For the first time ever, Peloton is increasing the monthly fee for its on-demand fitness content while lowering prices on its Bike, Bike+ and Tread machines to reach new customers under Chief Executive Barry McCarthy.

McCarthy, who has been at the helm of the company for just over two months, will announce the sweeping changes internally on Thursday. Peloton is attempting to reverse the recent sharp drop in its stock price.

Peloton shares initially jumped on the news before being halted just after 11am on trading volatility. Shares edged up again, but have recently fallen about 4%.

McCarthy, a former Netflix and Spotify exec, has been candid in recent press interviews about what he sees as an opportunity at Peloton to reduce hardware costs. In theory, this would lower the barrier to entry for a consumer, and then the company could focus on growing monthly recurring revenue.

“The price changes announced today are part of CEO Barry McCarthy’s vision to grow the Peloton community,” a company spokesman told CNBC.

Effective June 1st, the price of Peloton’s all-access subscription plan in the United States will increase from $39 to $44 per month. In Canada, the fee increases from $49 to $55 per month. International member pricing will remain the same, Peloton said. The cost of a digital-only membership for people who don’t own Peloton gear remains $12.99 per month.

Peloton explained the decision in a company blog post shared with CNBC. “Creating exceptional content and an engaging platform comes with a cost,” the company said. The price increases will allow Peloton to continue delivering to users, it added.

Meanwhile, starting Thursday at 6:00 p.m. ET, Peloton will be slashing the prices of its connected fitness bikes and treadmills in hopes of making its products more affordable to a wider audience and increasing its market share due to a pandemic-driven surge in demand.

  • The price of his bike will drop from $1,745 to $1,445. Cost includes a $250 shipping and setup fee.
  • The Bike+ will drop from $2,495 to $1,995.
  • The Tread machine sells for $2,695 compared to $2,845. The Tread cost includes a $350 shipping and setup fee.

Peloton is also currently testing a rental option in select US markets, where users can pay a monthly fee of between $60 and $100 for a bike rental and access to its library of workout content. The company said it recently expanded the test to more markets, adding the Bike+ as another rental option.

As of December 31, Peloton had 2.77 million connected fitness subscribers. It has a total of more than 6.6 million members, including those who pay just to access its training courses.

The company has already shown a penchant for making its hardware more affordable, especially with McCarthy pushing the subscription model. Earlier this month, the company began selling its new power product, the Peloton Guide, for $295. That’s $200 less than what Peloton announced last November for the device bundled with a heart-rate bracelet.

Peloton under pressure

For the past few weeks, Peloton’s stock has traded below $29 where it was listed when it went public in 2019, also bringing it back to pre-pandemic levels. Shares are down nearly 35% since the day McCarthy was announced as CEO.

McCarthy took over as CEO in early February from Peloton founder John Foley, who now serves as Executive Chairman.

At the time, Peloton also announced plans to eliminate approximately 2,800 jobs across the company and shed hundreds of thousands of dollars in annual expenses as part of a massive restructuring and operational realignment.

Still, there are concerns McCarthy, who says he still works closely with Foley, isn’t doing enough to become profitable again.

On Wednesday, activist Blackwells Capital reiterated his call for Peloton to consider selling the company, arguing in a presentation that the company’s shareholders are worse off now than they were before McCarthy took over. Peloton did not comment.

What Blackwells and other analysts do agree on, however, is that Peloton has built a loyal subscriber base who have invested in the company’s exercise equipment and continue to pay the monthly fee for associated content. The average monthly net fitness turnover for the most recent quarter was 0.79%. The lower the churn rate, the better news for Peloton.

As of December 31st, Peloton’s Connected Fitness subscribers were also completing an average of 15.5 workouts per month.

Peloton continues to introduce new types of classes, from yoga to meditation to kickboxing, to give its members more bang for their buck.

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