Peloton, every mention
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every year anyone Ben Gilbert 102David Rosenthal 87
Verbatim, from the transcripts: the passages where Peloton comes up
Formula 1: Fast cars, celebrities, and B2B software (Audio) · Acquired
- ▶ 4:12:47 David Rosenthal You got your Peloton, you got your F-One simulator, you're watching Drive to Survive and Tiger King.
Microsoft Volume I: The Complete History and Strategy of founding through Windows 95 (Audio) · Acquired
- ▶ 3:44:48 Ben Gilbert Peloton revenue can dry up a lot faster than contracts for mainframes.
Benchmark’s Mitch Lasky and Blake Robbins on The Art of Business in Gaming · Acquired
- ▶ 44:44 Ben Gilbert It's also exactly what we talked about on the Peloton episode, where Peloton, despite all the problems, has possibly the most incredible consumer subscription business, at least from their first five, eight years of customers.
Nvidia: The Machine Learning Company (2006-2022) · Acquired
- ▶ 2:09:58 David Rosenthal It's so hard for me to imagine that that's like to the degree of a Peloton or a zoom or something like that.
SONY (75 years of electronics history in 3 hours) · Acquired
- ▶ 1:25:19 David Rosenthal So, as you heard on the Taylor Swift and Peloton episodes, rather than just telling you the same thing every time this season with Vouch,
Peloton - the entire history and strategy behind America's trendiest workout · Acquired
- ▶ 0:14 Ben Gilbert Just internalize all the Peloton instructor slogans.
- ▶ 1:04 Ben Gilbert Well, listeners, we have been waiting to do a Peloton episode for a long time, just searching for that, that right moment.
- ▶ 1:33 Ben Gilbert We just scramble over 24 hours to prep and have done basically nothing in the last 24 hours except learn everything we possibly can about this company that we are so intimate with already.
- ▶ 2:22 Ben Gilbert Well, first we wanna say, uh, we're recording this on February ninth, and, uh, that is important because yesterday, uh, February eighth was the day that the news broke about all of this Peloton stuff.
- ▶ 2:40 Ben Gilbert And I think he frames this better than we ever could have in his email to the company this morning.
- ▶ 7:20 David Rosenthal I've got some, I definitely want to discuss Peloton's product lineup because I have some thoughts.
- ▶ 7:41 Ben Gilbert Uh, is that Peloton laid off 2800 people, including 20% of their corporate office, and as fascinating as it is to dive into this business and this strategy, and of course some of the drama, this is a super tough day, a super tough week for…
- ▶ 15:08 David Rosenthal And I wonder if also, you know, again, we talked at the top of history and facts about how this was a hard week for so many people at Peloton and you know, our hearts are with them and it's hard.
- ▶ 18:42 David Rosenthal It dropped literally the stock price dropped 66 zero percent shades of what's happening with Peloton now.
- ▶ 18:51 Ben Gilbert And 60 is a modest drop compared to what happened with Peloton.
- ▶ 21:14 Ben Gilbert And listeners, as you can tell, we're spending a lot of time here on Barry, in part because I think it's really important to know, as we think about the future of Peloton, you know, what is his MO?
- ▶ 21:30 Ben Gilbert And why, you know, to the extent where you're excited about the future of the company, why?
- ▶ 21:55 Ben Gilbert And I think, uh, there, there is nothing more necessary for Peloton than that than, than right now.
- ▶ 26:25 David Rosenthal So now let's, let's switch over to the Peloton track of the story here.
- ▶ 26:30 David Rosenthal Peloton, as many folks probably know, was founded in 20 12 by John Foley, who, and this is where, you know, the connections just go so deep here.
- ▶ 26:38 Ben Gilbert David, I think it's inappropriate to start the Peloton story in 2012.
- ▶ 27:00 Ben Gilbert Uh, and then another one actually interviewing John Foley on Peloton, which is great.
- ▶ 27:03 Ben Gilbert And this, we don't think about the narrative of Peloton that much this way right now.
- ▶ 27:13 Ben Gilbert But if you think back to when you first heard about Peloton,
- ▶ 27:50 Ben Gilbert It is totally inappropriate to like be, think about Peloton in a vacuum.
- ▶ 30:15 David Rosenthal Um, so the Peloton idea, like, it was, it was revolutionary.
- ▶ 31:24 David Rosenthal And at this point in time, when Peloton was getting started, not obvious is his quote is everything linear dies, everything on demand wins.
- ▶ 32:19 David Rosenthal And like, we can't give enough credit to Peloton and John Foley for innovating on this.
- ▶ 32:58 David Rosenthal But like, it's slow and it's not, you know, anyway, that's what Peloton was.
- ▶ 33:09 David Rosenthal He had been prior to starting Peloton.
- ▶ 33:36 David Rosenthal But you know, it's interesting too, thinking about the book and e-reader market relative to Peloton too, and maybe some lessons that Foley learned from that, you know, you could have the best hardware in the world, but
- ▶ 34:45 Ben Gilbert They thought if we have a bike, even if it's, you know, like, uh, a bike with our software, that's interesting enough to people, and we can partner with either SoulCycle or Peloton.
- ▶ 35:35 Ben Gilbert So Peloton were sort of forced to do their own content and, and pivot to a really vertically integrated strategy.
- ▶ 36:00 David Rosenthal Okay, so that's what Foley was doing immediately before, um, before starting Peloton, but before that he had been a long time
- ▶ 38:59 David Rosenthal I think it's later in my notes, maybe what the current market cap of Peloton is, but at its peak, it was a forty five billion dollar public company.
- ▶ 40:31 Ben Gilbert It's a very interesting thing here, where we all know Peloton is a killer product.
- ▶ 49:31 Ben Gilbert First fund, uh, Peloton was a big, big part of that.
- ▶ 51:49 Ben Gilbert If you, if you haven't ridden the Peloton, like, why can't I just mount an iPad on an old, uh, iPad on an old exercise bike?
- ▶ 52:23 David Rosenthal You can do a hack a Peloton and get some of the integrations with third party sensors.
- ▶ 53:05 David Rosenthal Which happens in September, 2019, but leading up to that, there's kind of an issue with the business that they got to sort out, which is, uh, earlier in 2019, they get sued for first one hundred and fifty million dollars, and then they up…
- ▶ 53:35 Ben Gilbert So, this is my, one of my larger bear cases for Peloton.
- ▶ 53:46 Ben Gilbert Well, if you look at Peloton's income statement today, and, and across recent quarters, so we're at sort of a relative point of maturity here, uh, about a third of the revenue that comes from subscription, so not like the physical bike…
- ▶ 55:32 David Rosenthal But my understanding is that the top Peloton instructors make like 500 K to a million.
- ▶ 56:07 Ben Gilbert Or the radio, Peloton actually requires multiple licenses for the particular way that they use the music.
- ▶ 56:13 Ben Gilbert So first, uh, Peloton I think is technically, just like the radio, a live performance.
- ▶ 57:06 Ben Gilbert So there's a lot of people who can say, no, I don't grant you a sync right, which is why in this lawsuit that you're referencing, David, when Peloton did end up pulling a bunch of stuff off of, uh, the service, which a lot of people were…
- ▶ 57:47 Ben Gilbert Peloton pays out 3.1 cents every time that you are on a ride and hear a song.
- ▶ 58:24 Ben Gilbert So if you're on the bike subscription, that's like 23% of your subscription that you're paying to Peloton goes immediately to the labels, which kind of checks our math above, that the biggest part of that, that, you know, one-third of the…
- ▶ 58:54 Ben Gilbert It may be the case that Peloton is large enough that they've negotiated a specific revenue share, you know, somewhere between 15, 25, 30%, something like that.
- ▶ 1:00:26 Ben Gilbert Because they're bragging about in their, all their earning stuff, increasing user engagement over time, and having internal KPIs around, we want people to use the service, I sort of came to this conclusion that they have to have a…
- ▶ 1:01:43 Ben Gilbert And instead of the nine dollars that I sort of estimate that Peloton has to pay,
- ▶ 1:02:19 David Rosenthal Another way to look at it is like, artists should really embrace Peloton.
- ▶ 1:02:32 Ben Gilbert And Peloton is notoriously very collaborative with the most popular artists.
- ▶ 1:07:16 David Rosenthal Interestingly, at the IPO happens right after the whole WeWork debacle, which we covered on this show with Dan Primack, also a big Peloton fan, uh, at the time that was, that was fun.
- ▶ 1:08:25 Ben Gilbert Before we, before we get to the Peloton ad,
- ▶ 1:10:11 David Rosenthal I mean, like, you know, it's, uh, does it end up being bad for Peloton or is this just good marketing in the end?
- ▶ 1:10:55 David Rosenthal Also, it was probably great for Peloton because I, I didn't go back and watch it, but my recollection of it, put the controversy aside, is that the commercial itself was like, eh, fine, you know, uh, like, but then they got so much hype…
- ▶ 1:11:10 Ben Gilbert But this sets Peloton's track record for, uh, they can become a dominant trending topic in a pop culture-y way, which,
- ▶ 1:11:20 Ben Gilbert It, ah, every time they would come to dominate headlines after this, it's not really good for them.
- ▶ 1:11:28 Ben Gilbert Other than the one which is like, hey, now that the pandemic hit, Peloton has perfect product market fit.
- ▶ 1:16:24 Ben Gilbert All right, so David, uh, tell everyone why I was the most fortunate person in the world to, uh, in January, 2020, have just so happened to have bought a Peloton at that moment in history.
- ▶ 1:17:11 David Rosenthal So the pandemic hits, you know, like you said, if Peloton had very good product market fit with a certain narrow customer segment,
- ▶ 1:17:29 David Rosenthal They add roughly a million subscribers in the next year.
- ▶ 1:18:01 David Rosenthal Uh, if, you know, fitness has now become fully digital, they are the leader in the category.
- ▶ 1:18:13 Ben Gilbert You know, NordicTrack and Target making black and red bikes and making up Peloton-like sounding names for them, and...
- ▶ 1:18:23 Ben Gilbert But also pioneering this category of connected fitness, which says, sure, Peloton's gonna do a tread and a, and a bike, but they're not gonna do a mirror and a, you know, band-based weight set and, uh, you know, and a yoga thing.
- ▶ 1:18:37 Ben Gilbert Like, there's all these brands that are saying, like, ah, Peloton,
- ▶ 1:18:44 Ben Gilbert So there really is this super real category of connected fitness that Peloton totally pioneered.
- ▶ 1:18:53 David Rosenthal Connected fitness, both within the Peloton suite of products and competitors, is it a broad thing or is this something that just works really, really well for spin classes?
- ▶ 1:19:08 Ben Gilbert I've done a bunch of the Peloton strength stuff.
- ▶ 1:19:11 Ben Gilbert I think that works well, and I think that the Peloton strength, uh, classes definitely appeal to a crowd who is not going to buy an Olympic weight set in their garage, or is not going to go to a gym.
- ▶ 1:20:03 David Rosenthal I, I both have an Olympic weight set in my garage, but I use the Peloton strength stuff more often, especially as I like get a little older and the idea of, you know, squatting and bench pressing is less appealing to me.
- ▶ 1:22:02 David Rosenthal Anyway, September of 20, this is where I think things start to get a little wonky with Peloton.
- ▶ 1:22:09 David Rosenthal They introduced the bike plus in September of 20,
- ▶ 1:22:22 Ben Gilbert Pandemic hits, and unless you're getting one in the first week or two, you're out months before you can get one, because Peloton doesn't make any of their own bikes, uh, they certainly don't make any of the US, so we're at the whim of…
- ▶ 1:22:51 David Rosenthal Like they certainly, they have a total pricing power now to their philosophy.
- ▶ 1:22:54 David Rosenthal And like we've been talking about, they want as many people to access Peloton as possible, blah, blah, blah.
- ▶ 1:23:00 David Rosenthal But so they introduced the bike plus they price it at 2495.
- ▶ 1:23:15 David Rosenthal So they lower the price of the original bike to 1895.
- ▶ 1:25:54 David Rosenthal So now let's think about me as a customer for Peloton.
- ▶ 1:26:02 Ben Gilbert And now here's, here's David's Peloton buying experience.
- ▶ 1:26:11 David Rosenthal I think of some of the problems with Peloton, the product was not quite right.
- ▶ 1:26:19 David Rosenthal So they, they roll a truck to do the delivery for me as a customer for the bike plus.
- ▶ 1:26:27 Ben Gilbert They own all their own distribution, and they're driving around neighborhoods all over America.
- ▶ 1:26:32 David Rosenthal They roll, they roll a truck in old cable parlance of a truck roll for a customer service.
- ▶ 1:26:38 David Rosenthal They install the bike plus for me.
- ▶ 1:26:41 David Rosenthal The shoes that come with it, the cleats didn't fit, so they had to send me new cleats.
- ▶ 1:26:56 David Rosenthal I return it because they have a 30 day, you know, return policy.
- ▶ 1:27:00 David Rosenthal They roll a truck, they pick it up.
- ▶ 1:27:12 David Rosenthal They've rolled a truck
- ▶ 1:27:18 David Rosenthal They rolled a truck.
- ▶ 1:27:21 David Rosenthal They rolled a truck to do another customer service for me.
- ▶ 1:27:30 Ben Gilbert They're probably not profitable on you until like maybe year three as a subscriber.
- ▶ 1:27:49 David Rosenthal yeah, to your point, like how long do they have to retain me to even break even on me now?
- ▶ 1:28:01 Ben Gilbert There's a trend that they need to follow over the entire lifetime of their business, which is
- ▶ 1:28:08 Ben Gilbert Dropping the price point so they can keep attracting that next concentric circle out from the core affluent customer.
- ▶ 1:28:15 Ben Gilbert If they're actually interested in continuing to grow the business, they need to do that.
- ▶ 1:28:35 Ben Gilbert Um, because I think that made their business really not resilient, all the, the things that they did there, uh, but they probably should have easy to say in hindsight, but not shipped the bike plus and not dropped prices yet, even though…
- ▶ 1:28:54 David Rosenthal Uh, and then, and then in terms of like cannibalization of their existing customer base, and I think they really, uh,
- ▶ 1:29:02 David Rosenthal Hurt themselves a lot on some of the aspirational aspects of, of the Peloton brand around this.
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