For reference, a year or so ago, TR was looking to fill a product manager role. In the job spec it seemed to imply that one of the requirements was to get the company churn rate down to 20% (if I understood the wording correctly). Does that alter your opinion on what is good (vs not)?
When Peloton went public, the Seeking Alpha analysis projected churn of 32%. Actual results . . . 8% (they didn’t seem to know the difference between quarterly churn vs annual). The general consensus seemed to be that it was off-the-charts great (and company financials reflected it). I don’t know the fitness subscription business well enough to know whether 9.5 is bad and 20 is horrible or 9.5 is great and 20 is good. But in any case, no doubt that all such subscription-based companies look closely at acquisition costs, so yes 10% is expensive, 8% better and zero the best.
. . . also note that the 9.5% churn is referring to the installed base. When Peloton was growing over 100% per year, it’s growth net of churn would be 90% (i.e. not be standing still).
I probably have a skewed perspective: I’m in the software industry, and our annual churn is 2 -3% with annual revenue in the mid-billions. So that’s my frame of reference
I get why people subscribe to Peloton, but I do not get at all why Peleton bikes are $2,000.
It’s less advanced than a smart trainer that costs half its price (manual resistance adjustment!), even including the cost of an iPad.
Either sell a premium service that will run on one of the many smart rainers/bikes on the market, or lease the bikes as part of the subscription (plus shipping and a safety deposit).
Making people spend $2000 upfront and $40 a month seems like a pretty dumb business model.
First the cost of the product is more than the cost of the components….you have to factor in R&D, customer support, marketing, sales expenses, and a whole host of other things.
Peloton has to spend a ton of money on trainers, video production, software support, etc. The cost of all that has to get tacked onto the cost of the bikes.
Further, the value of a product to consumers is more than the total of the cost of goods that is then marked up XX%. The value / eventual price is based on what consumers are willing to pay for a good. Successful companies create products that can deliver very high margins because they have filled a need / desire if consumers and those consumers are willing to pay for it.
But you have unknowingly proved my point….Wahoo does not have the same overhead structure that Peloton does because they don’t have the video production costs, talent retention, etc that Peloton does. Conversely with Zwift, they do not have the associated hardware costs (yet) that need to be be covered.
They both (Zwift and wahoo) do the same services as PTON independently, presumably at a profit, and not benefitting from economies of scale of PTON. PTON, should be cheaper.
Maybe McAdie+1 is clouding my comprehension but I think you have it the wrong way around.
Not really….I think my posts above were pretty clear and succinct. If you have a specific question, I’d be more than happy to answer, but like I said, I have zero desire to argue the fact that you see Peloton, Zwift and Wahoo as all being similar re: R&D.
I’m interested to see how Tonal does. Kind of feels like they are trying to be the Peloton of strength training. $3000 for the initial equipment then $49 a month. Makes Peloton looks like a deal. I’d be surprised if they were anywhere near as successful even with Lebron James backing them
I mentioned above that I know a LOT of Peloton people (hundreds), and I’ll bet 1/3 of them now own Tonal machines and preach about them constantly. The other 2/3 want one, but are struggling with the idea of paying 2 subscriptions. Peloton really should have bought out Tonal and added it to their arsenal. The Peloton strength solution (called “Guide”…seriously, could they have picked a worse name?) pales in comparison.
