Peloton Interactive CEO Peter Stern Talks New Products' Price Point

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It's time now for the stock of the hour, and it is Peloton. The shares are falling after the company announced an overhaul of its hardware as well as raising prices. This is Peloton's first major attempt under new leadership to lift the company out of a multi year slump. So perhaps there's no better timing than to bring in the CEO, Peter Stern, who is behind this products revamp, and of course Bloomberg Tech co host Caroline Hyde also joins us.

Now.

Peter, welcome to Bloomberg. Thank you for speaking with us. Big hardware line, a big AI platform, Peloton IQ coming out today. Long anticipated, but the market appears underwhelmed. And I know that you don't follow this stock move on a day to day, minute by minute basis, But what my investors not fully appreciate about this announcement.

First of all, Scarla, thanks for having me here. And I leave the day to day gyrations of the stock to the experts, traders, the analysts, folks like yourselves. That being said, if you look at the if you take the long view, let's look back a year, our stock is almost doubled. Look back a month way up, so I wouldn't focus on day to day, but I would focus on the news that we announced today because it's

Who sees the value not just an investor, but your stakeholder is me who owns Pelotine Bike, thinking about is it me who's going to upgrade? Is it a whole new cohort that comes in and buys these more pricey products but with more built in cameras, more effective nature of wellness.

I'm sure yeah. So.

Caroline, first of all, thanks so much for being a member. It's great to have a fellow member here. And we are focused both on existing members as well as non members. For existing members, they're getting so much today. We are introducing forever ever, regardless of when you bought your equipment, the benefits of peloton Iq, and that's just included in

So everyone's getting that.

Major partnerships, for example, one with the Hospital for Special Surgery to focus on injury prevention and rehabilitation. All of these things happen for existing members, but if you're not an existing member, there has never been a better time to become one. With the launch of this all new

It's almost in many ways like Cross Training way that which you're sort of identifying it. But if I look at the analyst notes and maybe the reaction from the stock is because a lot of this have been baked in, you've already given us full year forecasts. Then in many way talk about what churn you're expecting, but what subscriber growth, what do you think this will spur in terms of sps.

So we knew, of course as we went into this year what we were going to be launching, and we were able, as you point out, Caroline, to bake all of that into our guidance for the year. But we also included in our guidance that as the year progresses, we will be inflecting back toward growth. And that's a big, big step for us as a company.

We had a couple of.

Years where we've been down as we have regrouped after the pandemic, and we are now in such a good place where you see us having reignited our innovation engine. Of course, our customer love has never left us. Customers really just appreciate what Peloton does for them, and in particular have that deep connection with our instructors. So we're building on that foundation and now feel more confident about our future than ever before.

I like we said earlier about how existing members will have the benefits of the new software, but will you continue to support the existing hardware and software if customers don't upgrade to the new equipment, Because down the road, at some point, you want to get everyone to the new model of Peloton equipment, don't.

You, Scarlett.

We build our products to last these the bikes that we have today are still beautiful, even the original bikes, they are absolutely beautiful, and they are fully functional. Our treads are designed to last, the rose designed to last. We're continuing to support them. We are not in the obsolescence business. Whatever it takes for you to get and stay fit, we want to support you on that journey.

You said about the growth trajectory, the inflection is that profitable growth.

When are we going to get?

Absolutely so we you know, I'm so pleased that we have now been able to deliver five consecutive quarters of significant and free cash flow, and so this is now a company that we're running in a very disciplined way and we're delivering real profitability. And I think you can see that in the year over year changes in the stock price, where we're up considerably because people now feel so confident about the future.

And you're confident in the price point. What's so interesting is that what point do you see that elasticity? How high can you push me when I've got loyalty to a tounda to Cody Risby, how much do you think that I will continue to add on price points? When it comes to the bike to the tread to the subscription.

So we know that every dollar is precious and people are considering how to spend their money these days, and so we're very careful about what we do here. But we're also looking at the value that we deliver, and we know that, you know, if people are going to invest in something, they should be investing in their health, in their well being, in their longevity and how they feel both physically and about themselves. And Peloton allows them to get a great return on that investment.

So we did do a price increase.

It was the first change in our all access membership in over three years.

We were very thoughtful about what that was.

And we hope that our members appreciate all of the additional benefits that we've provided them over the last year, for example, adding about twelve thousand more classes, forty more programs, more modalities, things like weighted vest workouts, as well as what we just announced today, which is the introduction of Peloton Iq, which provides basically the benefits of a personal trainer in your home.

I want to get your sense of the competitive landscape. When you look at music streaming services, people usually have only one they pick Spotify or they pick Apple Music for actual streaming of television shows, maybe they have a couple of them. When it comes to fitness and wellness, what's your sense of how many people are willing to hold on to and pay for.

Yeah, so, first of all, we're happy for you to work out in whatever ways you choose to and in as many ways as you do. But our focus is on making sure that peloton can be the answer for you, regardless of what aspect of total health you're focused on. Cardio, of course, is where we started and we're known for that between our row, our tread, and of course the bike. But now strength is a huge area of focus for us.

So we're a great solution for that.

With the cameras that we launched today in our plus line, we're able to count your reps, we're able to give you feedback, we're able to suggest when you should be up in your weights. Then we get to things like mental well being. We talk about breath work, our meditations, the work that we do with yoga.

All these things help.

So, I mean and I can see that the strength halle Berry perimenopausal. You're thinking about a wellness trajectory very briefly. P Five years from now, how do you see yourself in the finest landscape.

Yeah, So we intend to be your essential partner in the journey to feeling better about yourself and living your best life. And that means not just focusing on the quantity of years that you have on this planet.

But the quality of those years.

And we know that there are choices that we can make, behavioral choices that we can make that make a difference in the quality of those years. Those are am I doing cardio? Am I doing strength? Am I taking care of my mental well being? Am I eating right? If I need supplements? Am I taking the right supplements? Am I sleeping right? We can make a difference in every one of those areas, and we intend to.

Peter Stern a pleasure. Thank you so much for joining us today. CEO of Peloton, Peter Stern joining us along with the Bloomberg Tech co host Caroline High