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Peloton S-1 (sec.gov)
173 points by harryh 53 days ago | hide | past | web | favorite | 205 comments

Under the risks section:

"We derive a significant majority of our revenue from sales of our Bike and a decline in sales of our Bike would negatively affect our future revenue and operating results;"

What many people don't know is that you can access all their classes using your own exercise bike and their apps, paying a little over 1/4 of the normal monthly subscription fee. The limitations of this approach is that you don't get to participate in the leader-board gamification of your workout, and your bike won't have the integrated sensors to tie your output back into their app, but for a fraction of the price of both the bike and the service, it's a good way to either test out their service to determine whether it's something you're into, or to permanantly utilize most of their product at a fraction of the cost.

I have it and I like how the whole package works together -- in particular, how certain teachers are very careful to show how to keep good form for your back etc.

When I see a guy on the same exact machine as me, showing bad form like a slightly curved back or whatever with the heels, and then correcting to the proper form, referencing the same bike, on a giant Android tablet in front of me, that is very helpful.

And this whole thing is sitting right there in my room as a ready to go thing whenever -- taking mini-obstacles out of the way like going to the gym, studying proper form without someone having to ape it for me, etc. are admittedly pretty trivial things -- for a lazy sack like me, having all these done and together has made a difference.

"It just works."

(Edited for grammar.)

“You can do everything an iPod can do with a _____ for a fraction of the price.”

I can’t even remember what the competitors were, because none of that matters if it’s not effortless to use.

An exercise machine that's effortless to use, you say? :-p

I was a naysayer about smartphones/iPhones -- why would I want all these things globbed into one thing instead of my beautiful modular setup now?

Here, too, I thought -- it's an Android tablet bolted to an exercise bike.

Not saying that either the Peloton or the iPhone were epoch-shattering brilliances. Just noting that, as you suggest, sometimes putting together things that used to be separate is, well, a good and useful thing.

It's all about the experience. Same as all early Apple "i" products... the same tech was already out there, Apple just polished it way better than everybody else.

Actually, you could do much more with non-iPod devices than you ever could with one. Beyond the price advantage, the cheaper alternatives played multiple audio/video file formats, played FM radio and did voice recordings without an additional dongle, and didn't require creating an iTunes account to do something as basic as sync album art.

Okay, my grammar still sucks. But anyway, let's talk more about form, in language as in life.

In my 20s I had injured myself several times, from lifting and running around Ann Arbor. After one extreme and almost paralyzing injury I went to a neurosurgeon.

The neurosurgeon gave me the choice of surgery or strengthening my core and perfecting my form in exercises going forward.

Fancy exercise stuff is cheaper than surgery.

Strictly speaking the best exercises are all completely free.

There are a lot of comments here smirking about bikes that go nowhere, etc. If you think a stationary bike is "unnatural," pounding pavement does not seem all that different.

The point is good form. There are many rivers to that ocean.

A bike that goes nowhere is much safer than the alternative, in the US, at least.

Want to know another awesome product?

An actual road bike. You can, like, go outside and stuff.

Not really an option for a lot of people. Mobility issues might be a problem, environmental issues, personal safety issues, etc.

Not in winter unfortunately. - All of us Canadians

Fat bike. Wear a down jacket.


I had no idea! I had to go find it for myself: https://www.onepeloton.com/membership

$19.49/mo gets you all the content. It's double that ($39) to make use of the bike's live metrics/dashboard/leaderboard, plus the bike itself is $2245.

This is really interesting to me, as I've heard quite a few people say that the content is what they really like.

I have been using a cheap stationary bike ($200) plus an ipad running free indoor biking workout videos for about 6 years now. I love it - so much so that I created a website to store all the best motivational content I can find for endurance training workouts.

I'm doing Startup School this summer with the project - Slipstream https://slpstream.com/

The mission is to make it easier for people to get a workout done with a motivational content assist. Most of the content is free access, some is from Netflix/Amazon Prime Video and others. I don't produce content, just recommend the best I can find.

In some ways it could be seen as an alternative to Peloton for people who don't want to add another subscription. Or those who would rather use their own equipment.

Initial features are a filter so you can narrow your search by media type (podcasts, documentaries, guided workouts) featured sport, access type (free/Netflix/Amazon Prime etc.) duration, etc. Also a playlist/bookmarking feature where you can cue up a series of videos to roll through during your workout or bookmark podcasts or other content for later.

Roadmap/wishlist is to build a community where users can recommend content to the main site and to each other. Also to monetize via ad sales for promoted posts and featured sponsor/athlete pages where they could feature their content and product recommendations.

I'd love any feedback from readers of this thread who have used Peloton or spent time thinking about it or using alternatives.

p.s. I have a ton more content on my to-add list. If you have any suggestions you can submit content on the site https://slpstream.com/contact/


Anecdotally I know people to go home and race each other on their Pelotons. They all seem to like theirs.

Zwift is a really great platform for this.

There’s a couple writeups on the web. Here’s one I used:


Presumably that post has affiliate links. It’s not my page.

I guess they’ve raised the subscription price. I think I’m grandfathered in at $13/mo paid via iTunes which I preload with discounted iTunes cards to knock another 15-20% off the price paid.

I do wish I had the metrics and integrated solution. Maybe I’ll upgrade someday.

> I do wish I had the metrics and integrated solution.

The only metric that matters is how many workouts did you do today, or this week. Unless perhaps you're planning on entering some sort of competitive spinning event all those numbers don't add up to anything.

I have a smart trainer, rather than a 'dumb' stationary bike, because the thing that gets me to ride a bike in my apartment without the satisfaction of getting somewhere or feeling the wind rushing in my face is getting to measure my performance and see numbers improve over time.

I get that I'm not Peloton's market (they don't care about nerds who build their own kit, and that's probably the right choice) but I 100% understand why this stuff matters.

>The only metric that matters is how many workouts did you do today, or this week.

Not if you're actually serious about going faster on a bike. Power data (as provided by basically any non-Peloton smart trainer) is incredibly useful in maximising the effectiveness of workouts and measuring your fitness. A high-end smart trainer like the Wattbike will also give you data on power delivery through the pedal stroke and left/right power balance, which has real implications for performance.

Unless the metrics are what help you keep showing up, maybe?

Perhaps a better investment would be to buy a road bike for $2,000. Spend $245 on a trainer and gear. Finally, get the subscription to the classes, and now you have both Peleton classes and a road bike.

The best way to buy a $2k road bike is to pay $1k and buy it from someone who thought it would be a great idea to buy a $2k road bike.

Kind of like when my dad bought an elliptical machine and my mom called it the world’s only $2,500 clothes rack.

She lied. It is far from being the world's only $2,500 clothes rack.

Absolutely, bicycles depreciate much much faster than cars!

If you are handy doing your own repairs it's also very cost effective since not too many tools are required and compatible parts are cheap, easy to find and easy to install.

My road bike cost $300 AUD, I have maybe spent another $250 on parts and tools. I have been riding to and from uni and now work pretty much every day for three years and I love it to bits.

You’re assuming that people who buy a Peloton want to ride outside. Also, half the purpose of Peloton is the tracking and app integration.

No, some people have $2,000+ road bikes that have never seen the road or been outside. They just set them up on a trainer with sensors ([1][2][3]) in their living room.

[1] https://www.chainreactioncycles.com/au/en/tacx-vortex-smart-...

[2] https://www.99bikes.com.au/accessories/indoor-trainers/smart...

[3] https://www.pushys.com.au/accessories/stationary-stands/smar...

No idea why they would spend US$2,000+ on them, most of this price is for improvements on weight and drag reduction, if you aren't moving the bike then there isn't really a point. Except for the wheels and tyres as rolling weight has some impact on your pedalling, I really don't understand.

Perhaps. How do road bikes on trainers handle out of saddle riding? Many spinning classes involve out of saddle riding.

A modern smart trainer will continually vary the resistance level based on software cues to simulate inclines, head/tailwinds and the effects of drafting. If your Zwift ride arrives at a steep climb, you'll need to downshift and get out of the saddle to keep up, just as you would do in the real world.

Peloton has a mechanical knob that controls the resistance.

It's clear that a lot of people love the Peloton experience, but it's a pretty lousy training tool for any kind of real cycling.

"Thing is bad at something it's not built at all for." Peloton is a fancy spin class bike it was never meant for actual training about road riding, beyond the aerobic training aspect it's completely separate from biking.

Modern trainers handle it just fine. I used to be a professional cyclist and would log about 20 hours inside/week during winter.

You can also get a roller with resistance, that is probably the best investment I ever made.

For people in the US I recommend http://www.insideride.com/ and in Europe the equivalent is this: https://www.elite-it.com/en/products/home-trainers/rollers/q...

That is a good question, I found a video where someone is using a Swift trainer and at the 2:52 mark they are out of the seat: https://www.youtube.com/watch?v=c-3-6KDu1fY

This question was asked numerous times on every bike/trainer related discussion board. They handle just fine. I have my carbon bike on a trainer like 5 years already every winter and part of spring

Peloton's absurd price is the only reason it is popular. It's for people who want a song and dance with their exercise instead of focusing on working out.

This is exactly right. Good comment.

I did exactly that for over a year, at which point I felt I had contributed my fair bit to their operation. Now I have about twenty classes ripped to my device that I select at random and use on an excellent spin bike at my gym.

This thread on the pretentiousness of the peleton ads (which clearly work for them) is a bit of fun:


Nice unit economics: Our Connected Fitness Subscriber Lifetime Value for fiscal 2017, fiscal 2018, and fiscal 2019, was $267.1 million, $604.4 million, and $1,053.8 million, respectively, or $3,433, $4,015, and $3,593 per Connected Fitness Subscriber, respectively.

As we expand our content offering, develop new interactive software features, and grow our community of Members, we believe we can maintain a low Average Net Monthly Connected Fitness Churn, resulting in a high Connected Fitness Subscriber Lifetime Value. In addition, with the growth of our Connected Fitness Subscriber base over time, we expect to improve our Subscription Contribution Margin as we scale our fixed content production costs.

Net Customer Acquisition Cost (profit) can be calculated as Adjusted Sales and Marketing Expense (which excludes depreciation and amortization expense and stock-based compensation expense) less Adjusted Connected Fitness Product Gross Profit (which excludes depreciation and amortization expense and stock-based compensation expense). Our Net Customer Acquisition Costs (profit) for fiscal 2017, fiscal 2018, and fiscal 2019, was $14.2 million, $(4.9) million, and $1.6 million, respectively, or $183, $(33), and $5 per Connected Fitness Subscriber added, respectively. We believe we will continue to drive rapid payback and efficiencies in Net Customer Acquisition Costs (profit) by further leveraging sales and marketing investments as a result of heightened brand awareness and growing word-of-mouth referrals. Changes in Connected Fitness Product margins or sales and marketing expenses may result in an inability to fully offset our customer acquisition costs.

What's amazing is that they get people to pay _more_ than they would - or would even think of paying - for a streaming service like Netflix or Hulu, but their content creation costs are obviously a fraction of what it take to produce even one show on those platforms.

What's really crazy is that the cost of 1 month of a Peloton subscription is less than the cost of 2 spinning classes in a real-world spin studio.

If you spin enough, you actually do save money with a Peloton. $40/month + $2000/bike vs $30/class (in LA/NY/SF) results in a breakeven point of roughly 4 months if you spin every weekday, which many spin aficionados do.

What's really crazy to me is how expensive those spin classes are, how many people go to them, how little they pay the stay, and how all those companies still lose a ton of money!

How much do instructors get per class? $25?


> 2 spinning classes in a real-world spin studio

Located in the most expensive markets in the country.

(Not a spin-class person.)

I thought that was a high number, and I live in a lower-cost market (Atlanta). Looking at one-off/small chain spinning places that do not have outposts in New York State or California, I found single-class pricing to be in the $20-25 range. Given the cost of living difference between here and NYC, the $30 quoted for LA/NY/SF seems on target.

Many gyms have free spin classes as part of their membership and many corporate gyms offer it for free. I taught classes part time all across metro Atlanta for years as a working hobby.

I think it makes sense.

Not to get too "ad-speaky", but people aren't buying something like this to be entertained, they're buying it because it promises them a better life. Peloton aren't selling content, they're selling the idea of being in shape and healthy.

Yeah. Pretty much half the economy is too.

This is an odd comparison.

content that results in entertainment != content that results in health benefits

People regularly pay $50~$100/month for a gym membership so they're anchored against that.

Those "odd comparisons" are the exact thing that make companies like Peloton successful. Another word for that is "disruption"; when you're comparing two markets that don't make sense to compare, and yet here we are with an S-1.

Peloton is a cheap gym and an expensive Netflix, by reasonable comparisons. Damn is that a great business model.

It actually make a profit on their content production. Attending each class in person costs as much as a typical spin class. A back of the envelope estimate says they're probably pulling in $250k+ MRR from the studio alone.

If they actually use it, it is probably doing them a lot more good than Netflix or Hulu.

I mean, I just plop myself on a spin bike and watch Netflix. It's the only time I really allow myself to.

Agreed. And nothing surreal at first glance in it's calculation either. EBITDA as well.

It really makes we wonder how we could be on the verge of a recession when companies like this become successful? Maybe I'm just too cheap to ever buy something like this but it feels like a mass marketed luxury good that requires a decent level of consumer confidence to have succeeded.

I bought one. I like it because it's pretty high quality, I didn't have to pay cash ( using Affirm it's 62/mo /39 months), and I was able to test ride 2 of them for free ( apartment complex has a gym with one, but very hard to get a time to ride ). My girlfriend likes it because it saves tons of time compared to driving to e.g. SoulCycle or a spin class and they have nice social features like a competition ladder. But I don't do the classes, I just use it for the free ride.I try to set new PRs in terms of wattage, peak HR etc. Edit: I also like that you can sync your heart rate/ distance to Apple Health and it counts towards your rings in Apple Activity/Apple Watch.

I use the one at our gym and I do like it. I have a decent carbon bike and an indoor trainer that I use Zwift with. However I do like the peloton for the classes/instructors. The machine itself is nice and the ride is smooth. The screen is amazing. It pairs with ANT HRMs and Bluetooth earphones. It’s nice to visually see the metrics and have target numbers. Missing ERG is a problem but not a huge one. I don’t think it’s a fair comparison with juicero. Although I’d admit I won’t pay for it - I’m not the target market. I’m primarily an outdoor cyclist.


Radical idea: Peloton's target market is the kind of person who is willing to spend $2000 on an indoor spin bike either as their primary mode of exercise or as one of many bikes they own. Especially people who want to spin during times of inclement or excessive warm weather.

The Peloton may not make much sense to people living in pleasant cycling meccas on the West Coast, but east of the Rockies the weather is a lot worse and being able to spin indoors is huge.

In particular, Peloton's target market is overwhelmingly female. You won't find it in this S1, but this alone is why you can straight up disregard everything you will read on HN today about their business model.

No, it turns out women don't buy carbon bikes, a standalone trainer, wrench a cassette on it, put the bike on, hook up a tablet somewhere, install a power meter, ... it's the ole "rsync is superior to Dropbox".

I think your rsync-dropbox analogy is a good one, but I also found your statement about how it's a gender thing to be somewhat sexist, (it almost sounds as if you're implying that rsync is for men and dropbox is for women because in general men are more inclined to do difficult things than women).

I think he's harkening more to the standard try-hard neckbeard analogy than just genders. Usually women aren't lumped into that category. I think it's nuanced, but I don't think he meant any harm when writing.

It's not prescriptive, just descriptive. Obviously women are capable of doing all of that, and many do. But 25+ years of road bike (and other weekend warrior pursuits, MTB etc.) vendors trying to target specifically women have not seen remotely the success that Peloton had in reaching them, and there a lot of non-technical reasons in there, too.

very few men would do this either

> Especially people who want to spin during times of inclement or excessive warm weather

New Yorker here. If I had the space I’d totally get one of these.

You might appreciate this twitter thread: https://mobile.twitter.com/clueheywood/status/10896997623312...

On the other hand, if you already have a decent bike a trainer or a set of rollers is a lot less than $2k...

Kinda? Maybe?

I think its a mistake to think of a spin bike as a bike. There is peddling, and you can get most of the same experience out of a turbo, HR, PowerMeter, but then you are also putting the frame and peddles through really weird force profiles as you spend time bouncing between the front and back of the bike.

I mostly ride PowerZone, for which a turbo, hr and power meter would be perfect, but if you like the ‘dance’ classes you might want to look for a more ridged machine, you really have to be able to trust that its not going to break on you.

At least in the US, trying to ride a bike outdoors in a lot of places is a good way to get yourself killed by a car. I've spent the last 5 years in NYC and SF (which are both very bike friendly). I bike rarely and pretty cautiously, but even so all of my closest calls with getting killed by a car have been on a bike.

How about the Presidio for riding? I am not a cyclist. I incurred a foot injury recently, and have been thinking of ways I can exercise without impacting my feet too much. I've thought riding a bicycle around the Presidio could be pretty nice.

As long as you stay away from the bridge and the packs of tourists, sure. But I quickly found myself wanting to over the bridge to get different/more challenging routes.

It’s not very big, is the problem, and is often full of tourists.

>> NYC and SF (which are both very bike friendly).

What? You need to visit some more cities. Just because bikes & cars co-exist in a city does not make them bike friendly.

Compared to a lot of cities NYC is doing alright in regard to cycling infrastructure. They’ve put in a lot of lanes and have plans to do more. NYC official statistics claim the number of bike trips has tripled over the last 15 years, so riders seem to be responding.

Obviously there are way more bike-friendly European cities but as far as US cities go NYC doesn’t seem that bad to me (I don’t live there, but have noticed all the new cycle paths when I visit occasionally over the years).

Copenhagen is bike friendly. Amsterdam is bike friendly. NYC and especially hilly SF are neither bike friendly. At best they are bike tolerant :)

On vacation in Copenhagen right now. OMG is it bike friendly.

I have 2 trek bikes, one carbon fiber. I love cycling at high speeds. Unfortunately because of awful drivers I can’t do this. So yes, I use the Peloton, in addition to cycling to work and around the Bay Area ( but at lower speeds ;) )

I’ve spent a fair amount of the summer cycling around european cities and you can’t get even close to kind of work out you get on a peloton. What I’m realizing is that all of the years where I assumed that because I was cycling to work that I was at least doing something was completely false.

45 mins on the peloton is a completely different thing to even 45 minutes out in the country.


"how can we be headed for a recession when my janitor just bought a second house?"

Absolutely this. A bubble doesn't look like one until it pops, so you can't just say "everyone's buying $2000 spin bikes, everything must be fine." For starters, Peloton does a majority of its sales through Affirm and other consumer financing instruments, and books them as revenue. It's more accurate to say "everyone is buying $2000 spin bikes using 30% APR installment loans."

In the risks section, Peloton says that their revenue could decline due to changes in credit markets and decisions made by credit providers - a.k.a. if a bunch of people start to default on their expensive luxuries.

"In the future, we cannot be assured that third-party financing providers will continue to provide consumers with access to credit or that available credit limits will not be reduced. Such restrictions or reductions in the availability of consumer credit, or the loss of our relationship with our current financing partners, could have an adverse effect on our business, financial conditions, and operating results."

The Affirm loan product for peloton is 0% only (with no late fees in any circumstance).

Instead of $1,995 up front, it's $3,783 over 39 months due to a subscription contract bundled with the financing. This is a very clever way to claim "no interest" but actually charge 27% APR. There are absolutely customers who buy this but can't afford it.

If you didn’t buy the bike on financing you’d still have to pay the subscription if you wanted to use it as intended. Not sure why you’d consider the subscription an interest-like fee. The only criticism is if you stopped using the bike before you paid it off then yes you would be paying subscription fees for all the remaining months you never used.

For what it’s worth, according to the S-1 they stopped bundling the subscription as part of the bike financing in 2018, so people are just financing the bike alone now.

And this is no different than the typical phone financing plan.

You pay for the phone over 24 months but they “bundle” the cost of an additional line. You would pay for the cost of the line over 24 months but no one would call that “interest”. You could buy the phone outright and just use it over WiFi just like you can use a Peleton without the subscription. But, in both cases, it reduces the functionality of the product.

In both the case of the phone and the Peloton, it allows someone who can't afford the item to pay for it on an installment basis. On an individual level that access to credit might be useful, but it's another form of leverage which is not always a great indicator.

In fact, if people are making use of that option unusually often, economists get worried. Prior to a recession, consumers often feel more confident (and take on more financial obligations) than they have the resources to keep up with.

Phone is very different IMO. I always lease my phone not because I can’t afford to buy it outright but because the upgrade cycle is so short (a year with iPhones) that if you are someone who likes having a new phone then it makes more sense to just lease one and upgrade whenever you want than to buy it and deal with the hassle of selling it later on.

The equation has changed more recently as smartphone innovation has really slowed and very incremental. In either case you can just keep you phone for 18 mo and buy it outright.

Leasing is different than what the phone companies are doing now. They just take the retail price of the phone and divide it over 24 or 36 months if you want to cancel your included service contract early, you pay off the remaining balance of your phone. They often allow trade ins or upgrades as an option, but there is functionally no different from 0% financing 24 months with a phone + service plan than 0% financing + subscription with Peleton.

I have a 128GB iPhone 6s from 2015 that my son is still using and will at least get the current version of iOS through September 2020. Phones have been “good enough” since the 2013 iPhone 5s.

I could have easily afforded to drop $800 on my iPhone, but why would I if it would cost the same over 24 months?

People have been getting “free phones” with a contract at least since the mid 90s when I was selling them at Radio Shack.

That is some interesting SaaS+hardware financial wizardry.

As you said, very clever.

Cheap credit will not last forever..

Tell that to furniture stores that have had 5+ years of no interest financing forever. Of course they raise the prices to pay for the “free financing”.

When is Affirm going public? I want to invest in that.

If you want exposure to similar businesses look at Afterpay or Sezzle...both publicly traded already.

That's exactly why bubbles form and lead to economic cycles: people get too confident and overextend themselves.

In this particular cycle, more companies seem to be using this profitable business model: charge huge margins for your product and sell it on credit. Bikes, SUVs, higher education (phones, too, but that's not new). When the economy hits a blip -- say, due to a trade war -- people start losing their jobs, default on the loans, and things spiral down.

(To be clear, I'm not saying it will happen soon. It might, and probably will take years and be a mild pop.)

> people get too confident and overextend themselves.

It sounds like you are stereotyping Peloton purchasers into one group, then assuming that the majority of them can't afford nice things.

What if you look at it from the flip side and say "people buying $2.4k in-house bikes have a lot of money and all is well in the world"?

People with lots of money don't buy on credit because the credit is expensive. So it really comes down to whether most purchases are on credit or not. US consumer debt peaked in 2008/9, dropped until 2014 and started rising again - it's now higher than 2008/9.


> People with lots of money don't buy on credit

Interesting, but lots of wealthy people do finance their purchases, especially if they are active investors.

Someone elsewhere in the thread mentioned that the Affirm rate is de-facto 0% if you factor in the subscription for the full-term. Taking that as fact (apparently it's changed now, so can't 100% confirm), you'd have to be pretty anti-debt (or lacking in cashflow) to pay in full on that rather than earn interest on the balance for 3 years if you intended to book the subscription anyway.

> Interesting, but lots of wealthy people do finance their purchases, especially if they are active investors.

The wealthy borrow in order to get tax-advantaged liquidity (borrowing against, instead of selling their securities which attracts immediate tax obligations). I'm also certain the wealthy are not borrowing at 27% APR - they'll likely get a 5% APR loan from a bank and use a small fraction of it to buy the Peloton bike in cash.

> It sounds like you are stereotyping Peloton purchasers into one group, then assuming that the majority of them can't afford nice things.

I did not mean to do that. In fact I was on the brink of deleting my comment, to avoid this exact misunderstanding.

I wanted to point out that getting expensive things on credit is risky for most people who cannot afford to buy them straight out.

Edit: This isn't a commentary on Peloton specifically, but all of the S-1 posts we've been seeing on HN recently.

I wouldn't interpret this behavior as success per se. I think a significant motivating factor for going public now would be to provide liquidity for your existing investors (and yourself as the founder) before a recession hits.

If you've had significant capital tied up in a company and you're worried a recession is on the horizon, then this is a great time to push your company to go public. If you wait much longer then you risk either:

1. Going public in a recession and losing some of your potential gains.

2. Waiting an unknown amount of time for the economy to rebound and to pull your cash out then. This assumes the company weathered the recession well AND given you the same or better gains than investing in something else during that time.

TL;DR: Going public now is a much safer time for investors to divest than closer to or after the coming recession.

Do folks who profess not understanding why something is successful ever use such data to improve their outlook?

They became successful in the bull market. Markets and debt cycles don't act like sine waves. They build up to a peak, and then they fall dramatically, then they build up again, and they fall.

Being "on the verge of a recession" means nothing. There have been people constantly predicting the next recession since 2011. And there was zero talk of an economic downturn in 2007.

That's not true. The yield curve inverted in 2006, people talked about recession for a while, then the general conclusion was that 'it's different this time', and right after everyone forgot about the inversion, the recession hit.

But don't worry, it's different this time. ;)

The company is selling the bikes and treadmills at a 43% gross margin. This company somehow sells its bicycles at a higher gross margin than Apple(38%). How!

Do economic models distinguish consumer confidence from ignorance?

luxury design is well stablished field. And it is not that impacted by world crisis and recession.

The trick here is fooling common investors into into without realizing it is a luxury market.

Basically, there is a small but lucrative market. You know that you have to milk it while you can and move on.

This kind of startup, exploit this small market mostly to inflate the numbers. Probably they already have 100% of their real market cap, but they will claim that they can still expand to billions of people that pay $5/mo gyms all around the world and only increase their growth (when they very might be already at 100% and realistically their future growth is zero ...or until the pile of money they get runs out)

...a funny exercise: search for the first anecdotes from the first clients of juicero here on HN ;)

On the other hand I wonder what effect easily accessible credit cards have on overall sales for products like this.

On a personal level it would be a stretch for me to spend $2200 when I could get a used airdyne and an ipad for less than half.

Companies have been offering “0% financing” for decades regardless of economic conditions - see furniture stores and more recently phone companies.

I’ll probably end up buying a Mid range NordicTrack stationary bike ($1800) within the next year to go along with my NordicTrack treadmill and elliptical. I don’t currently subscribe to IFIT, but I might seeing that I could potentially use it across three pieces of equipment.

The IFIt modules are an optional piece for the elliptical and treadmill and I believe it is built into the elliptical.

As far as cost, between the cardio equipment I have (and plan on purchasing), the kettlebells, weight bench, weight bars, tv, wall mount, AppleTV, etc, by the time all is said and done, I will have spent close to 8 grand.

It’s well worth it for the convenience of just being able to go to the spare bedroom and workout anytime that we want to while catching up on TV or in my case watching technical videos without having to go through the ceremony of going to the gym.

On the surface this is basically the Juicero of fitness equipment. If you want a good piece of workout equipment, buy a Concept2 erg. If you want a bike, you can get a carbon-frame bike for the same amount of money and then just get a trainer for it. Ostensibly there is zero reason for this to exist.

The one argument in its favor is that youth sports are usually very heavily subsidized by masters sports. So if you weren't on a varsity sports team in high school or college and didn't learn how to work out properly, then it's easily 5x more expensive to do so as an adult. So maybe there is some value in having someone to teach you how to do basic cardio.

This is nothing like Juicero.

Peloton addresses two real needs in the exercise marketplace: home-based classes, and high-quality exercise machines. It simply combined both into one product.

There is huge demand for the former, especially from white-collar workers with high demands on their free time, and a a fair amount of demand for the latter.

At $2000, a Peloton bike is $1000 to $2000 cheaper than the cheapest carbon-frame bike I could find on Google, and more than $3000 cheaper than a racing or tri-bike. For indoor use, you'd also need a trainer, adding another $600-$2000 to the cost (depending on the trainer you get).

Generally, the people I know that have carbon fiber frames also have several other bikes, each for a different niche, and the Peloton would slot right into the indoor spin use case.

There's absolutely no reason to buy an expensive fast stationary bike. It's an oxymoron.

  At $2000, a Peloton bike is $1000 to $2000
  cheaper than the cheapest carbon-frame
  bike I could find on Google
That's pretty weird because I get "13 of the best carbon fibre road bikes - from £599 to £10,000" [1] ($732 to $12,200) as the first Google result for "carbon-frame bike"

Unless of course you're ignoring every sub-$4000 bike as "bad cheap carbon" but that's not what your post says :)

Of course, if you're buying a bike exclusively to use on an turbo trainer, I'm not sure I see the logic to getting a carbon frame anyway - it's not like the weight or bump handling makes any difference.

[1] https://road.cc/content/buyers-guide/254002-13-best-carbon-f...

Bikes are usually 20 - 35% off when the next years models come out, which e.g. is this week for Cannondale. You can easily get a carbon Synapse for less than 2K from almost any bike shop that sells them, or even REI. It’s an endurance bike, but for doing low cardio you wouldn’t necessarily want a race bike anyway.

You can easily get a carbon Synapse for less than 2K from almost any bike shop that sells them, or even REI.

True, REI has the Synapse on sale for $1700 right now not including delivery. Once you add a trainer of the equivalent functionality as the Peloton trainer, you're looking at $2500 spent. Add in a screen, and you're looking at $2700 for a small screen or $3500 for a similar-size screen as on the Peloton.

But when you decide to join your local cycling club or even get outside for a spin, you are good to go with the Cannondale ;) ... not so much with your stationary Peloton. Also, the highest priced CycleOps trainer on REI's site right now is $420. So $2120 with trainer...as for the screen, most people buying carbon road bikes and trainers probably already have a working flat-screen to spare.

> There is huge demand for [home-based classes], especially from white-collar workers with high demands on their free time

I suspect people are overestimating this part of Peloton's market. All the people I know who spin value being a part of the community: the camaraderie of working out with other people, chatting after the class, etc etc. It's more like going to church than going to the cinema.

Yes because “all the people you know” is a representative sample.

It's way too expensive for me and I have no interest in doing cardio indoors, but I think you're missing out on the value of the digital side of the product.

I think exercise bikes and treadmills are dreadfully boring, but what Peloton offers is exactly targeted at that problem. Adding an array of things to do and a social aspect has to be a big deal, and if that's all packaged together in a high end package that "just works", and works really well - that seems like a winning formula.

There's a lot of fitness subscription services out there, but there's more money to be made on hardware in general. So as long as there's a market for people to pay two grand for a stationary bike and whatever dollars a month for a subscription, it's a winning business model. I'm guessing it stacks up against the SoulCycles of the world very nicely.

I can watch Netflix or YouTube (exercise motivation vids or general interest vids) on my tablet to keep me busy while I stationary bike.

> Ostensibly there is zero reason for this to exist.

It's a lot more convenient to exercise in your living room than go outside or go to the gym.

I thought Guitar Hero was stupid and people should just buy a guitar, but people loved it.

GH is $50, not $2000

A spin bike is not really the same thing as a bike on a trainer because of the social aspect, and the classes. And the cost of a Peloton and the subscription is less than traditional spin classes.

I am surprised that people are willing to spend 2x-10x as much as competing products when you look at the total cost.

Isn’t a big assumption that people actual desire “to be social”? I’m a former part time fitness instructor who spent 15 years in gyms all across the metro area, only ran outside for races with friends, and they were my social circle, but now as an older married man in my mid 40s, I have no interest in the gym scene. I like having a home gym with cardio equipment and weights.

But as far as spending more than the functional equivalent, do you have the cheapest house that would give you shelter? The cheapest car? The cheapest phone?

If you have no desire to be social you would most likely not buy the internet connected and subscription bundled spin bike, and get a much cheaper bike without those features. Or by a better quality one with a power meter for less money.

There is a difference between interacting with people and being around people. For instance, you can enjoy the camaraderie of other people doing the same thing and not actually having to engage in meaningless smalltalk around socially acceptable safe non controversial topics with people you don’t have anything in common with.

I loved teaching classes with 50+ people and was completely comfortable. But I hate interacting with large groups in more social settings.

Zwift adds the social to a bike on a trainer. The big advantage of a bike on a trainer is that it's the bike you will use on the road so the fit etc is exactly the same when you do get out (I realise there's a huge market for indoor only)


It is also a disadvantage. The peloton bike is heavier (IE sturdier), has more grip options, takes up less floor space (the peloton is about a foot shorter than my actual bike, not including any potential trainer that would be required), is much more easily adjustable (if multiple people are using it), and is purpose built for the function it serves. I only have experience with one type of trainer, so this may be trainer dependent, but the peloton is also much quieter than the type of trainer I've previously used.

Not to mention that when I want to go out and ride I don't need to detach my bike from the trainer, or when I want to get a workout I don't need to attach my bike to the trainer. As somebody that is primarily a bike commuter, the accessibility alone is worth having 2 bikes. And if you are going to have 2 bikes, why not buy an indoor bike that is specialized for the task.

I feel like you're onto something. They take an iPad, slap it on an exercise bike, and charge $2000 for it. I could do that for the cost of the parts. The only thing protecting their business model is their exclusive patent on the idea. Perhaps the patent system is what is truly at fault here?

Comments like this remind of the top comment when Dropbox was announced on HN[0]:

"For a Linux user, you can already build such a system yourself quite trivially by getting an FTP account, mounting it locally with curlftpfs, and then using SVN or CVS on the mounted filesystem. From Windows or Mac, this FTP account could be accessed through built-in software."

No, it isn't just an ipad slapped on an exercise bike. And no, the patent system is not at fault here. There are dozens of competitors in this market. But Peleton won it.

[0] https://news.ycombinator.com/item?id=8863

Exactly. I can’t say for sure they’ll succeed but they are definitely onto something here. I explained the things o like in the comments above. It is well integrated. All the pieces work really well together. In comparison it’s a fight to get zwift to connect with my smart trainer, hrm and cadence sensor every single time I hop on it.

I was skeptical until I did some classes on a Peloton, and I was impressed. It’s cheaper than one of the boutique spin studios, and the bike is nicer. It does a great job of making you feel like you are part of the class. I would own one if I already didn’t have multiple other ways I get my daily exercise.

The HN crowd is spectacularly ill-equipped to understand Peloton. It’s an actual physical product! Used by people who exercise! A business model that doesn’t involve evading regulation nor stealing personal data!

Nah it’ll never catch on /s

Do you have a Peloton or have you at least tried one? I don't/haven't but this seems pretty reductive.

Ipad: $800 (for similar size screen) Quality bike of similar component parts: $800+. Trainer: $800.

You're already $400 behind the cost of a Peloton, which is only $2000...

If you have access to wholesale prices for these parts, sure you could build your own Peloton at home. But using off-the-shelf parts you're just wasting money.

Why do you need a quality bike? You don't need it to be fast or efficient or have good shocks or tires if it's stationery.

rsync is better than Dropbox amiright?

They seem to have been careful to take some lessons from the soul cycle S-1 and roadshow, https://www.sec.gov/Archives/edgar/data/1644874/000119312515.... That one was eventually pulled.

The subscription part is interesting, they did 4x the sales in bikes -connected fitness products- as 2 years ago (719/183), and cogs is ~4x (410/113). But subscription revs are up 5x (181/35) and cogs on that are only up 3x (100/3).

Wow I was heavily skeptical of Peloton until these numbers. I would have thought who would pay a few thousand dollars for a machine and then an additional $39 a month. But 92% of all customers who have purchased the equipment are still subscribers at the end of June 2019, that is extremely impressive.

Do you spin, and have you ridden a Peloton? Nearly every person I know who likes spin enough to go to spin studios buys a Peloton after test riding one. They did that good of job nailing and improving the spin studio experience.

Their risk is that spin studios are a luxury item over and above gym memberships and will be the first things cut in a recession.

The Peloton "How I Built This" episode is well worth a listen for anyone interested in the company.


Good call.

At 33:30, John Foley and Guy Raz start talking about the Kickstarter and how it didn't achieve its goals.

At 35:00, they talk about the the initial pricing for the bike being breakeven ($1,200) and how that didn't work. The feedback was "at $1,200 [the bike] 'seems cheap', 'it sounds cheap.' And so, we said, well, let's increase the price...."

You can listen to more of the podcast, unpack this, and analyze what the reveals about that the demographics of the customers with whom they've connected so far. Without any intent to be critical, the HN readers who think the bike is too expensive have the opposite reaction to the people who became customers.

I suspect the average Peloton customer has more money than time.

Thank you for the link! this is awesome.

There are some funny things in the Risk Factors section:

“We have identified material weaknesses in our internal control over financial reporting and if our remediation of such material weaknesses is not effective, or if we fail to develop and maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.”

There are also three long subsections about music licensing (edit: and music-related legal proceedings mentioned in multiple places).

"There are also three long subsections about music licensing."

I'm a customer. I've noticed that some of their old classes are no longer available, presumably due to music licensing issues.

There’s also

> In addition, customers of certain of our providers have been subject to litigation by third parties claiming that the service and basic HTTP functions infringe their patents. If we become subject to such claims, although we expect our provider to indemnify us with respect to at least a portion of such claims, the litigation may be time consuming, divert management’s attention, and, if our provider failed to indemnify us, adversely impact our operating results.

Seems like standard boilerplate.

I’m a mega bear on this. It’s Juicero 2.0

The bike’s only have a lifetime of a couple years and the experience isn’t that great. The promise of software upgrades only take it so far until planned obsolescence kicks in.

This is just creating a fleet of useless metal that will have software vulnerabilities up the wazoo in a decades time.

I'm genuinely curious:

> The bike’s only have a lifetime of a couple years

What's your source for this figure?

> and the experience isn’t that great.

According to whom? You? Or the legions of apparently very satisfied subscribers?

I use a Keiser M3i with the Peloton app on an iPad. It’s great. The Peloton app records heart rate and cadence via Bluetooth. I run the Keiser app on my phone to record additional metrics, such as power. Much better solution than being tied to a proprietary Peloton bike while still enjoying the benefits of the always-fresh Peloton classes.

Mike biggest complaint is the music change. Way too many knock-off versions of songs by “studio musicians” instead of the original artists... https://www.engadget.com/2019/04/25/peloton-users-music-comp...

Have you ridden the Peloton bike? Wondering it compares to the Keiser, which I like quite a bit.

Saves money on music licensing costs

I have been waiting for essentially this, but with racing games onscreen. Does anyone know if they allow, or plan on allowing third party apps and games?

I can see a game like Mario Kart being very popular.

That would be amazing... I've never tried a spin class but if I knew that I could play Mario Kart or Burnout or something like that on the bike... what an idea!

I will invest in this company because I love the product and so does everyone I know who uses it.

But the general and administrative costs in 2019 seem ridiculously high. The tender offer last year only makes up 1/3 of that increase. What's up with that?

Am I doing correct math that they spent about $1200 per new subscription? $324m sales & marketing / (511k - 246k) new members in 2019 = ~$1222.

$915000000 revenue / 1800 full-time employees = ~$500k revenue per employee, though.

I was surprised to see how low the gross margin is on their subscription business, it has only recently broken above 50%. The cost of revenue for their subscription business includes licensing the music in their workouts, and the costs to operate their NYC and London studio.

I was also surprised to see the margins on the bike itself are about the same as on the subscription business. They have room to lower the price of the bikes to get more customers hooked on that sweet, sweet recurring subscription revenue.

I just wrote this post to summarize my views on the S-1. Focused more on the skeptical side, since I know there will be plenty of euphoria to counter-balance it:


Is it normal for the "20-votes-per-share" class B stock to "convert automatically upon ... (ii) ten years from the closing of this offering"?

Earlier of three events with a hard cap at 10 years, not really. Thats a bit of peace offering to investors re: dual(+) share classes and control.

These guys are following the Uber business model. Burn as much cash as possible up front to generate buzz and big numbers for the IPO, worry about profitability later. The problem is that, as Uber has shown, profitability never comes. Peloton will limp around for a few years after the executives have all taken their sweet IPO money home and become a shell of what it once was. Too bad.

A figure in the "Opportunity" section has two large inverted cones showing total addressable market.

The lie factor[0] of the "Peloton's Current Markets" chart is 4.2. The lie factor of the "U.S. Only" chart is 5.8.

[0]: https://infovis-wiki.net/wiki/Lie_Factor

Churn rate is better than I would have guessed.

Losses going up 4x year over year to $200m on $1b in revenue is pretty insane though.

When you spend that much on the bike you'd better get your money's worth.

I bought nearly new equipment for my home gym for 1/5th of the retail value on Craigslist... tons of sellers out there.

Is it true that the best deals are in February, after people realize they won't use the equipment they bought in January for New Year's resolutions?

85million cumulative workouts as of June 2019... really low actual usage relative to revenue.

Do they follow the same model as a big chain gym? Hope people get the subscription, but never use it?

I don't think their marginal costs increase the same way as a gym. People using their bikes more just means somewhat higher load on their servers for users using the workouts (and I suppose more demand for new content). There is a cost, but I'm guessing it's much lower than the cost of the added wear on gym equipment and the need for extra staff and other costs associated with a gym.

I wish you didn't have to wait a week to buy options for newly listed stocks, I want to write calls and buy puts on this ticker

Once consumer credit dries up, this company goes poof

Given how expensive a bike is, I imagine their market being even smaller than the apple iPhone market and a subscription-based health system can arguably be as important to someone as an iPhone, but it doesn't really have that "i want that" shine that iPhone does. I imagine they'll see a lot of growth short term and taper off really soon maybe after 6 years.

Have you seen how expensive a gym membership is?

Under $30 a month for a 24 hour fitness membership via Costco with zero initial cost ;)

"Nice" gyms like Equinox are of course significantly more. It's important to segment the gym market into different tiers and niches, and figure out what the market size is for each. Same as for direct equipment sales like this.

To your point, though, I suspect the people who would pony up for a Peloton are the same people who would splurge for a $100/month gym membership instead of a 24 hour, Planet Fitness, or local hole in the wall gym.

Spin classes cost $30/month at spin studios. The people going to those classes are Peloton's target market, not the people content to spin at the local 24 hour fitness.

What city are you in? Here in Portland, spin classes are more than double that. I think Peloton's market overlap is a combination of people who would sign up for Spin classes at a dedicated studio, people who would sign up for Spin classes at a nice gym that gives them as part of a membership, and people who think cycling is a good workout and have high disposable income, but no desire to join a real class or gym of any kind.

It's obviously not for people like me who would happily buy a set of used free weights for a few hundred bucks if I had a garage or basement.

Spin classes cost $30/CLASS at many SoulCycle studios with very modest discounts for frequent visitors. This is why they're releasing their Peloton competitor soon as well.

Equinox is $180-$500/mo, and popping up like mushrooms on every block in NY (36 so far). A Peloton bike is downright frugal in comparison.

I think there is probably significant overlap between folks who do both.

Not to mention the shady business practices of many gyms. Search "Planet Fitness requiring direct withdrawals" on reddit.

A gym membership starts at under $30/mo. I'm not sure at what point money spent becomes rapidly divorced from what you get but I'd wager that point is closer to $30/mo than to $100/mo.

if you need all the S-1 tables in one excel file (free but collects an email; FD: I work there) https://get.sentieo.com/peloton-ipo/

Does anyone know if fitness benefit reimbursement would apply to these?

TLDR; "We have incurred operating losses each year since our inception in 2012, including net losses of $(71.1) million, $(47.9) million, and $(195.6) million for fiscal 2017, 2018, and 2019, respectively, and expect to continue to incur net losses for the foreseeable future..."

Aha, this is what the cool kids call growth hacking! Exponential growth in net loss YoY. I've been a complete idiot trying to grow the curve in the other direction.

This is typical of most "growth" companies. Yeah, the revenue doubles.... but so do the losses.

Can't help but start to think that everyone is cashing out before the impending recession.

Grouping the filings from https://sec.report/Form/S-1 by day:

2019-07-18 5

2019-07-19 7

2019-07-22 10

2019-07-23 4

2019-07-24 12

2019-07-25 12

2019-07-26 7

2019-07-29 7

2019-07-30 7

2019-07-31 4

2019-08-01 5

2019-08-02 14

2019-08-05 3

2019-08-06 7

2019-08-07 6

2019-08-08 6

2019-08-09 5

2019-08-12 10

2019-08-13 5

2019-08-14 2

2019-08-15 6

2019-08-16 5

2019-08-19 4

2019-08-20 5

2019-08-21 8

2019-08-22 4

2019-08-23 9

2019-08-26 4

2019-08-27 2

Grouping this by complete weeks (excluding weeks where we don't have a complete Monday -> Friday list) we get totals of 45, 37, 27, 28, 30, in that order. Don't know what typical trends are by time of year, etc. HN has had a flurry of posts about S1s, but this trend doesn't seem to be the sudden uptick it has seemed to be on HN.

I think you'd want a chart going back a few years, grouped by month. Glad to see some actual data though!

https://fred.stlouisfed.org/series/NEWORDER (capital purchases by manufacturing)

It isn’t even clear that there is a risk of a recession according to some economic indicators.

In 2008, this indicator didn't turn down until the recession was well underway.

What about earlier ones? 2008 was a recession because the bottom fell out of the credit market after the subprime bubble popped not because of larger trends so it makes sense that capital investments didn't decline until they just couldn't get credit.

IPO takes months and months of effort and planning. It is not as short term as you seem to imply.

Which is why they're hurrying to get them done now, before things get bad?

It does seem like there are a number of them, but maybe that's just my impression. Anyone got numbers?

Also looks like they are already profitable, and growing like crazy.

EDIT: my bad interpreting the loss format, they are not profitable.

> We have incurred operating losses in the past, expect to incur operating losses in the future, and may not achieve or maintain profitability in the future

> We have incurred operating losses each year since our inception in 2012, including net losses of $(71.1) million, $(47.9) million, and $(195.6) million for fiscal 2017, 2018, and 2019, respectively, and expect to continue to incur net losses for the foreseeable future.

They've never been profitable.

My mistake, I interpreted the $(...) values as being negative losses.

Look at their contribution margins though. Especially on subs. Unit economics are, I guess unsurprisingly, fantastic on selling 2k bikes with a ~40$ monthly sub.

They're operating at a -25% EBITDA, so no they are not.

So does a major recession.

This comment has nothing to do with the financials of this particular IPO and everything to do with a perceived correlation between this event and some arbitrary macroeconomic event. Is there any reasoning you can give for why your hunch disproves the null hypothesis, which is that there is no connection between IPOs and what you perceive to be the impending recession?

another company i could have gotten in on on the ground floor for some stock options but was too pragmatic to think they'd be successful

Pragmatic in what way?

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