Peloton Stalls Out

before getting into the actual episode. I actually hope you don't get that reference, and don't worry, because one it's not important, and too, I will explain it before the end of the episode. It's nothing to get hung about. It's just me trying and failing to be cute and clever. But I did want to talk about Peloton, a company that was all the buzz just a couple of years ago, and now a decade after it launched, is currently in

her moil. Big issues at Peloton right now. By the time you hear this episode, maybe that will have changed, because things are changing that quickly. I also thought it would be good to use Peloton to talk about a business model that tons of different tech companies have really been trying to leverage, uh namely that of finding the way to continuously generate revenue from your customers. Um. There are a lot of different ways of doing that, which

I will touch on later in this episode. But that's what we're seeing throughout the text sphere, and it has been for some time now. It's not brand new. However, Let's first start with the history stuff of the company itself, and Peloton's history is actually pretty fascinating, particularly if you

do a little digging. But the oversimplified version, the one that I actually saw in a lot of i'll be honest, not very well written articles, is that a guy named John Foley wanted to find a way to help people like himself and his wife Jill, pursue their passion for fitness and indoor cycling without having to go through all the hassle and expense of finding the right place that

has the right classes and the right instructors. And that all this led to the idea of connected fitness devices in the home that could stream workouts and allow you the benefit of having that really great instructor without having to you know, seek them out, set your schedule to theirs, and pay on a prayer class basis. But that's just part of the overall story. See, there were five co

founders of Peloton. John Foley was just one of them, although by all accounts I come across, Foley was the guy with the idea and the one who sort of brought everything together. So he is critical crucial to Peloton. But there are four others. We should talk about two, and Peloton's history is also one about networking, and I'm not talking about the Internet or WiFi or anything like that, rather the concept of knowing the right people at the

right time to make stuff happen. So the five co founders of Peloton are John Foley and Tom Cortiz, Hassao Kushi, Graham Stanton, and Yonnie Thing. And this group has a lot of collective experience in different fields over the course of their respective careers, both in tech and in leadership. So let's do it quick and totally unfair glimpse at each of them. Keeping in mind this is sort of like the cliffs notes of cliffs Notes about each of

the founders. So John Foley, according to what I've read, was a gifted student in school, one of those people who never really had to put forth a ton of effort in their school work. I was that way for a couple of subjects, but not all of them. He also became enthusiastic about fitness as a teenage or. He particularly got fond of cycling. He attended Georgia Tech, so just down the street from me, and he got a degree in industrial engineering and then later he earned an

m b A at Harvard Business School. Among his various positions that he's held over his career, he served as a production shift manager for eminem and Mars Candy Uh. He served as president and CEO of Evite dot com, and later became founder and CEO of a company called Pronto dot com while also heading up Evite and Gifts dot com. And he would become the CEO of Peloton

once we get to that point. Tom Cortiz went to George Washington University, where he earned a bachelor's degree in fine arts, which is not a credential you expect to

find in a tech entrepreneurs resume. He worked for a company called a show Cub, which he describes on his LinkedIn page as a business that quote connects the most innovative social entrepreneurs around the world, offering critical access to funding, knowledge sharing, and a host of other value added services end quote, which kind of sounds like it's a networking company.

Later he became the VP of Product Management at Toronto, which remember John Foley was head of and he you know, also he points out in his LinkedIn profile that Pronto is an I a C slash Interactive Core company. Uh. Now, quick aside here, Interactive Core c O r P is one of those companies that gobbles up other companies. Right, it's a conglomerate. And it all started off as a business that was actually dedicated to expanding the reach of the home shopping network of all things, and it went

by a totally different name back then. Now I'm going to have to do a full episode about the history of I a C. Because it gets pretty complicated and bonkers a lot of companies that are related to media. But he's have truly you know, gargantine and confusing histories. Some of the businesses that I a C Has owned over the years include Ticketmaster, uh, the television assets of Universal Studios, Expedia, Lending Tree, asked Jeeves was an I

a C company and anymore? And as we'll see, I a C is sort of a lynch pen for uh of the co founders. Okay, so that's fully and Cortiz. Next we have Hissao Kushi. He earned a degree in English at the University of Amherst. And you might wonder, what do you do with a b A in English? And if your princeton in the musical Avenue Q, you kind of wandered through life aimlessly. But Kushi didn't do that.

He pursued a law degree at the Boston College Law School, and he became a lawyer and served as a lawyer for a couple of years in a law firm. And then and I love this part, he then turned his hand at being a screen right or for five years. I'm not sure if any of his work ever made it to an actual screen. I did a search on IMDb and came up blank. Doesn't mean this work didn't make It may mean that he's uncredited because of you know,

rewrites and things like that. But anyway, he then went on to work for companies like Ticketmaster, and then I A C in general and Evite in particular, so there's another connection through I A C. Next, we have Graham Stanton. He earned degrees and applied mathematics and economics from Harvard University. He worked as a developer for a company called Zero Degrees, which is kind of a was a competitor to LinkedIn.

Then he went on to work for drumroll Please Pronto, you know, one of those I A C companies, and then he held various roles within I A C before being named president of Gifts dot Com, also under I A C. And rounding out the co founders, we have Yoni Thing, who received an undergraduate degree in computer engineering and a master's degree in electrical and computer engineering from Georgia Tech, again just down the road. Much younger than

John Foley. However, he worked for companies like Cisco and Skype, and then had just taken a job with ticket Fly before he would become a Peloton co founder. So he was the one co founder who did not work for I A C. At some point in his career. However, his former college roommate had worked for I A C. That's where the connection to the others came from, and it's how Thing was was kind of tapped to come

on board with the other co founders. So out of the five co founders, four worked for various companies that were under the IO A C domain. H And also all but Feng had served as an executive at a company. Three of them had served as c suite executives, like chief executive officer or chief operating officer. So, in other words, by the time Foley was making his pitch, he was buddy buddy with several experienced and influential veterans in the

business world. Now, that kind of situation does not, by any means guarantee that a venture is going to be a success. However, it does mean you've got a pretty good foundation to work from. You've got folks who have actual experience, particularly in leadership positions. However, and this is important, none of them in the fields that Peloton was really focusing on. So while they definitely had experience and knowledge, it wasn't necessarily in the specific industry that Peloton was

getting into. But anyway, the story goes that fully came up with the idea for Peloton that indoor cycling, gems and studios those were not a new thing. The Soul Cycle brand had launched in two thousand six, and we wouldn't get the beginnings of Peloton until two thousand twelve. So uh, there's also a Flywheel Sports that had launched

before Foley had ever pitched the idea of Peloton. Fly Will Sports had also pioneered gamifying indoor cycling workouts by incorporating scoreboards that would show a writer's performance compared to others within that same class, but these were all centralized models.

They required customers to go to a physical location a gym or a studio, and obviously that limits the number of people who can actually participate at any given time, because rooms have a top capacity and classes can fill up quickly, specifically for popular instructors, so there was a limit to where that business model could go. You could open up more locations, but you couldn't magically make a

room larger than what it was. Foley's idea was that you could have the exercise equipment, in this case a stationary bike, and you could incorporate a screen into the design of that bike itself, and the screen would be connected to a home network, and that would allow the user to stream classes, so that you know, the writer could get the same benefits as if they were attending a spinning class in person, without ever actually having to leave their own home. Classes would not be limited by

the physical size of a studio. You probably would still limit the size of classes, but there could be hundreds of people as opposed to maybe a couple of dozen. And you could also record classes, which would give writers the chance to pararticipate in in a class that's led by their favorite instructor, even if the writer's personal schedule wasn't matching up with the instructors schedule, so you didn't have to, you know, reshape your life around the the

schedule for workouts. Foley says that he first called up his zow Kushi, whom he referred to as his very close friend, and Kushi was living in Los Angeles at the time with his family, and initially, Kushi says he thought Foley's idea was ludicrous, that no one would want to take classes over a video screen in the basement of their house on a stationary bike all by themselves. But then he says, he thought about the quality of the media and how that could define the quality of

the experience. That if you were able to recruit, say, the most charismatic and effective instructors to serve on your team, well then the product sells itself because that's the thing that people are going to latch onto. So he saw Peloton not as an exercise company, but more like a media software company, and that made him more willing to come on board, though he would do so from the comforts of Los Angeles. He didn't move across the United States for this and worked almost as more of a

consultant in the early days. Foley then pitched his idea to Tom Cortez, who was living in New York City. Cortez had also recently become a fitness enthusiast and was training for triathlons, among other things, and he came on board right away, although he was planning a trip with

his his fiancee or maybe they had just gotten married. Anyway, he was playing a trip which put him on hold for a couple of weeks, and there was a very close call that Fully almost hired somebody else to take Cortiz's place, but that all got strained out once he came back. Soon the other co founders joined in, and Fully's main job would be to seek out investors in the company, and they got to work putting the pieces

together to create the value proposition of Peloton. Now. Early on, Folly had thought about creating the service side and not getting so much into the hardware side at all, because hardware is hard. You have to you know, design it, you have to engineer it, you have to manufacture it and then ship it to customers. These are all huge expenses, not just in money, but in resources and and and you know time, and it takes a lot of time to go from creating a few bikes to scaling up

to mass manufacturing. And that's when you hit the point where the cost of individual components starts to come down. Early on when you're manufacturing, if you're doing small batches, it's more expensive. It costs more per component than it will once you get to manufacturing at scale, when costs typically come down and you have a better profit margin

on a per unit basis. So at first, Fully was actually considering finding a way to partner with existing hardware manufacturers and he would end up, you know, providing the virtual class side of Peloton's business model, and the other partners would supply the hardware. However, being a plucky young company with no name in the space meant Fully was hitting a lot of brick walls. Among the established companies

out there, nothing was really fitting his vision. He also felt that the prevailing stationary bike designs in the industry didn't have the aesthetics they felt were needed to sell his Peloton idea. So the group decided that making a bike would be a necessary component to Peloton's approach. I'll talk more about the early days of Peloton in just

a second, but first let's take a quick break. The decision to make their own bicycle, their own stationary bike, would make things a bazillion times harder in the short run for Peloton, largely because a lot of investors were not interested in backing an unproven company aiming at a yet non existent market, because no one had done this yet, so you couldn't prove that there was a market out there for it, and that this Furthermore, this company was

going to be building its own equipment, which again had no proven success in the marketplace, that they had never made an exercise bike. Fully said that he had. He got a lot of nose in those days, but then he also got a lot of people saying, Hey, if this ever does become a thing, I want to buy one. I imagine that had to be a pretty frustrating experience to be told I'm not going to invest in your company idea, but when you finish making it, I want one.

Fully was convinced that the bike itself wasn't really as important as the experience was, so he was drawing from his own history of attending spinning classes and gems. He said that people would talk about the playlist that was used during the workout, or the instructors approach and attitude, and how those things motivated the attendees while they were taking the class, and that was what fully saw as being the truly valuable component in what he wanted to

bring to Peloton. That that meant that they would have to find trainers who would be a good fit for the service. Now, all of this was happening before they had their first actual prototype bike, and it sounds to me like they were really laying the track down as the train was rushing toward them. That really comes through if you read stories about the first auditions they held for trainers. They put out notices on platforms like Facebook to look for people who would be willing to be

part of this great experiment. Apparently, they leased a small office space in New York City and they hung up a black curtain to section off part of the office space. The curtains purchased from Walmart. According to Foley and behind the curtain. You had the team, or at least part of the team, with cameras poking through the curtain to capture the audition of trainers who would actually kind of

lead a few of the staff in a session. They did not have a working Peloton bike prototype at this point, and according to every account I've seen, the auditioning trainers had to use a broken stationary bike. They frequently called it broken or rusted or jan kie uh. The trainers were told that they had to put together a playlist of music and show off how they would conduct an online spinning class and work to the camera right to show that they could actually motivate people through a streaming

video kind of feed. The first trainer that the company hired was Jen Sherman, who really became a celebrity in the Peloton group, and in an interview with Fortune magazine, Sherman said that they had this little tiny corner of the office that was sectioned off by black velvet curtains, so frigging shady. That's actually Sherman's quote. However, she soldiered on.

She put together a routine and she led John Foley, Tom Cortiz and Yoni Fan through a workout, and according to Foley, Sherman was able to get through all the strange limitations of the setting and the audition and show that this idea was not just possible, that it could really take off, and that possibility was really the important component of Peloton's sales pitch to investors. A stationary bikes were by no means new. In fact, bikes that incorporated,

you know, sensors weren't new. There were bikes on the market that had screens that could give writers feedback on stuff like their heart rate or the level of resistance they were currently using, or that could display images of landscapes that the writer was virtually moving through where the resistance of the bike could change as you encounter a virtual hill and that kind of thing. But creating an interactive media platform that was the new thing, and to

sell that, the trainers were absolutely a pivotal component. And then you have the name of the company. The group chose or fully really chose Peloton because it is a French term meaning a group of cyclists in a race.

This also reflected the company's gold to create a community of users who would become enthusiastic evangelists for the brand Fully recognize that spin classes work really well in part because you you can feed off the energy not just of the trainer, but your fellow cyclists who are in the class, and he wanted to make sure that the Peloton product would support community, knowing that if it did, users would do a whole lot of the marketing work for the company on their own. It would just be

great word of mouth. The co founders started off with around four hundred thousand dollars of seed money. Fifty thousand of that was Fully's own cash, and that's when they first launched the company back in twelve. At the end of that first year, Fully and team had managed to raise three point five million dollars in Series A funding.

Now that's a pretty nice chunk of change, but when you're talking about a company that's going to produce hardware and software and provide an ongoing stream of produced media content, it's not really that much money. The costs of developing the bike and then manufacturing the bike would be considerable. Early on, the co founders took their compensation in the form of equity in the company. They didn't draw a salary because they wanted to stretch that money as far

as they possibly could. They tapped a designer named Eric Valency to come up with a three D model for their bike. Design Ynni Thing worked on creating a back end system for the bike that would do stuff like track metrics and also allow streaming media content to go to a touch screen display. So it had to do all this right. He had to make sure that he created got a you know, a processor that would be capable of handling these different tasks simultaneously without being overloaded.

And then they worked towards building a bike for real zs In the team launched a Kickstarter campaign and this served many purposes. It was, of course a crowdfunded campaign, and it was partly there are just to raise more money, but it was also a means to advertise the concept of the Peloton bike to a wider audience and to get buy in from customers to create that core group

of fans. And you've got to remember the word fan is a shortened word for fanatic, and a lot of writers will use words like fanatic or cult when they're describing the Peloton user base. Anyway, the video for the kick started campaign showed off the prototype version of the Peloton bike and It turns out that the actual prototype

that was shown in the video had some pretty serious problems. Namely, it was unstable and wobbly, like really wobbly, So they made sure to avoid showing it wobble in the video. They showed it stationary, like truly stationary, no one using it or anything. Uh. And this was a marketing effort, right Like. They had to do that because if they

showed it wobble then that would never work. Uh. They also were able to get their manufacturer to change their approach and reinforce the legs on the bike so that it would no longer wobble. And it was a pretty simple stationary bike design. It wasn't super you know, complicated. It had a very large touch screen display mounted in front of the handlebars. That screen, according to the campaign, was a twenty one and a half inch ten a

DP resolution LED display. The display connected to a circuit board that had a one and a half giga Hurts dual core processor from Texas Instruments inside it. It also incorporated a forward facing camera and a microphone, so not only could you watch a class streaming to you, the class could see and watch you. This is the part I like to call the nightmare of Peloton, or at least Jonathan's personal nightmare, as I am certain that I do not want anyone looking at me when I work out,

But then I'll be honest. That's been kind of a moot point for two years and going now because I haven't worked out in two years, so I guess I don't need to worry about it. Users would be able to connect the bike to a WiFi network. Obviously you would need to in order to be able to receive streaming content. UH. The bike also supported Bluetooth tech, so you could connect your own wireless headphones or speakers to

at the bike. It also had the ability to connect wireless heart rate monitors to the bike so that you can trace that metric for the bike itself. The pedals connected to the resistance wheel via a belt rather than

a chain. This helped make it UH operate much more quietly than a chain based stationary bike, and instead of using brakes to create resistance, the Kickstarter campaign explained that Peloton would use magnetic resistance, so magnets position near the flywheel the wheel that turns through the belt connect to

connection to the pedals. UH. Magnets would end up creating resistance. Right, you have a magnetic force where the magnets are technically pulling on the flywheel, and that requires the user to overcome that force in order to make the wheel turn, and a resistance knob gave the rider control of how close or far away the magnets would be from the flywheel, So the closer the magnets were to the flywheel, the stronger the magnetic poll would be and the harder it

would be to pedal the bicycle. A later upgraded version of the Peloton bike, the Bike Plus, would include digital controls for the magnetic resistance, and in fact, users could set their bikes to mimic the resistance used by the instructor, so that as the instructor were at was, you know, adjusting the resistance of their own bicycle, then the users bike would follow suit. And that way the user would never have to be conscious of this or make the

changes themselves. Their bike would just do it automatically and they could focus rather not dying while they keep up

with a professional instructor. The video showed off that the bike would allow users to take online classes and they could find, you know, trainers that they really connected with and they could take live classes along with hundreds of other people at the same time, or they could scan through recorded workouts from past sessions and take those instead, and the workouts would include music and motivation from the trainers,

who are kind of positioned almost like celebrities. In fact, many of them would essentially attain celebrity status, at least within the Peloton community. Uh some of some of them would actually be celebrities in their own right, like professional cyclists who had participated in like Tour de France, for example.

The display would show users stats about their workouts, including information about specific sessions and accumulative data that would gather throughout multiple sessions, and users could earn achievements by attending classes and performing well. This would mimic a pretty successful strategy we've seen in the video game industry. Achievements really drive engagement there. That was the same reason Peloton used

them in their model. The kick started campaign had a goal of two dollars, and it actually raised more than three hundred thousand dollars. Now, that is less than the seed money that the group had used to launch the company in the first place back in but it was also enough support to show investors that there was a demand for this product. UH that I think might be

the real purpose of this kick started campaign. The campaign said the money was actually going to be used to officially start peloton production, like this was the the cash needed to get that ball rolling, to get the tools designed to produce the bikes, and to get the production UH system in place and all that, Like this was

the actual money to start that. They were up front that they had already raised investments to fund a studio in New York where trainers could lead classes, and they had already actually developed all the hardware and software, and

that you know, the initial investment money covered all that. Again, I suspect the campaign's real purpose was to test the idea among the public and get some grassroots enthusiasm for it, so that folks with deeper pockets, meaning investors, would see this kind of enthusiasm and say, yes, I will invest in this because I see that there is a demand

for the product. Now that three hundred thousand dollars, or to be more specific, that three hundred seven thousand, three hundred thirty two dollars came from just two hundred ninety seven backers. That would mean that the average amount of money that backers spent on that campaign was an excess

of one thousand dollars each. And that makes sense when you look at the rewards, because you would see that to qualify for the early Bird Special of our seeving a Peloton bike, you would need to plug down fifteen hundred dollars cash. The early Bird Special was limited to just two hundred fifty backers, and it did. It didn't sell out though at least five folks backed at the next level up anyway, that was at seventeen hundred dollars

for the Peloton bike. Maybe it maxed out initially and then people backed out of it before the campaign ended. That's possible, where they got two fifty people to sign up, and then before the campaign ended, some of those two people said you know what, uh, never mind and backed out. That's possible, uh, And then a few people backed at slightly higher levels. And these were all like the seventeen hundred dollar levels. Those were just for if you were

in the United States. Folks overseas would actually have to back at a higher level because the bike would have to be quote equipped for Canadian, European or Asian product standards. End quote. We don't believe in their standards here in the US of A. Well, the campaign made clear that the manufacturing of the bikes would happen overseas, and that Peloton had partnered with a company that had a history of making indoor cycles and a second company that creates

O d M tablet hardware. O d M stands for original Design manufacturer. Essentially, this is a company that produces the stuff that another company designs. So if you ran a design company you would come up with a design for a tablet, you would partner with an o d M and they would actually produce the hardware. This works

great for companies that don't have fabrication facilities of their own. Now, the results of the campaign weren't exactly a windfall for Peloton, like they hit their goal, but it wasn't a runaway success like some other viral campaigns we've seen on Kickstarter.

In fact, in all people had ordered a bike, so it wasn't It wasn't the runaway success they were hoping for, and they realized that they were going to have to start getting these bikes in front of people in order to sell more of them, to get people to see what the promise and premise of the bike were all about. So then the company secured a pop up store location in a mall in New Jersey and things would really get moving for the stationary bike company. I'll explain more

after we come back from this break. Okay, So Peloton has had its Kickstarter campaign, which was a modest success. I mean it's successfully funded, but it wasn't, you know, a Grand Slam home run. And then they look for a physical space where they can show off the bikes and perhaps get a little more traction, which, again, using these metaphors for a company that was making station stationary bikes is an irony that is not lost upon me.

So they went to this luxury mall in New Jersey. Uh, it's exactly the kind of mall that I really hate going to. We have something similar here in Atlanta, and it's pretty much the opposite of the kind of place I want to spend time in. But it is the kind of place that you would want to be at if you're trying to sell a high end piece of exercise equipment too well off suburban nights who may not have access to gym locations in their area because they

live in a suburb. By late the team was demonstrating the bike and selling orders for around five bikes a day, and they had considered it they could get one order a day that would be success, so they were actually exceeding what they were hoping for. However, they could not produce five bikes a day. Their manufacturer in Taiwan had a turnaround time that was between three to four months. Now.

Early on, they promised customers that they would deliver the bikes within thirty days and then, you know, I kind of hope that the customers wouldn't get too cheese off when inevitably there would be delays, and they knew there would be delays from the start. They actually said later on that they realized that if they had just told people up front it will be nine twenty days before this can be delivered, there would have been a lot

less you know, friction. Meanwhile, Fing was in charge of building out a production studio in New York where the classes were going to take place, but no one on the team had any experience creating a production studio, so it was kind of a trial by fire, as was everything else it seems with Peloton. The first bikes were finally reaching customers by January. At that time, the New York studio had not yet been finished, so the initial classes for those first customers were conducted in that little

curtained off section of office space in the studio. The actual UH, the full production studio wouldn't open in Chelse in New York until May. The company also had to create their own logistics department to handle things like delivery of the product because they found that they had been dependent on third parties and those third parties were UH. Let's say that those third parties were not living up to the standards of your average Peloton customer. It's a

kind way of putting it. And this is where we should remember that a Peloton bike is really freaking expensive. In a Peloton bike would set you back one thousand dollars. This was the original basic Peloton bike, and that's for

the hardware. You have to remember that the real selling point of the Peloton where those streaming classes, and that service would cost you thirty nine dollars a month, So you'll be spending nearly two grand on the bike, and then forty bucks a month to continue getting useful content while you're using that bike and that's the business model that are really we wanted to touch on this ongoing subscription fee, and we've seen this model become incredibly popular

among tech companies, and really what it really boils down to, it's all about getting the customer into an ecosystem and then capitalizing on that. And you see this everywhere. Printers do it more often than not. If you buy a printer, you are required to purchase toner cartridges from the same manufacturing company that made the printer. You are discouraged or sometimes outright prevented from using third party toner cartridges. We

see it in coffee makers. Curig famously tried to block customers so that they would only be able to use Curig produced coffee pods with their Curig coffee makers. We've seen it in game companies like Microsoft Gaming, which has its Xbox Game Pass service. This is a service that people will pay a monthly subscription to and in return, they get access to the game's currently supported by the service, and games come on and leave the service over time.

We see it in companies that push back against the right to repair. These are companies that want to lock customers into a system where they have to go to a company approved and licensed vendor for maintenance and repair. We've seen it in the form of planned obsolescence, in which a company's product is designed to only last a certain amount of time before the customer has to go

out and buy a replacement. These are all aspects of the same basic business philosophy, which is to find a way to keep your customers giving you their money, rather than having a one and done approach where someone comes up, they buy your product, the transactions over and that's it, and the only way you make more money is to sell more products to more customers. This is a way to keep a customer as a recurring customer. Well, all of that is pretty much a steep asking price, right

to grand plus forty bucks of for perpetually. This meant that Peloton's clientele typically were among the more affluent people in society, and some of the Peloton's equipment would cost even more. Like there were the Peloton Bike Plus, which was marketed for two thousand, four nine dollars, as was the Peloton tread treadmill. I think the tread Plus was topping out at just under five thousand dollars, so very expensive pieces of equipment anyway, Peloton, unlike its bikes, which

are stationary, was moving forward. In fourteen, the company raised another ten point five million dollars in funding. The following year, the company raised another thirty million dollars at least early in the year, and then, uh, you know, on the back end of the year they earned another seventy five

million dollars. And Peloton was using this money to build out more brick and mortar locations to show off the bikes, and also to build out that legit sticks department I talked about, and to grow the software engineering team as well.

And that wasn't the end of the investments. Peloton got another three five million dollars in The company established its products as being trendy, if somewhat restricted to a wealthy subset of the population, and in twenty nineteen, the company held its initial public offering that's when a private company transitions into a publicly traded company. The first day did

not go particularly smoothly. The I p O pricing was set at twenty nine dollars per share, meaning that Peloton expected that shares of the company would trade at twenty nine dollars a piece once the market opened. However, when trading began, it was actually dropped down to twenty seven dollars. Still, it would mean that the company would establish a seven point to billion dollar market valuation. Essentially, the valuation is the number of shares of the company issues multiplied by

the price per share. The little slip from twenty nine dollars to twenty seven dollars meant that Peloton got the dubious distinction of having the quote second worst debut of a unicorn end quote up to that point in two thousand nineteen. That's according to c NBC, a unicorn is a startup business that has a valuation of a billion

dollars or more. Now, all that being said, I think a lot of folks in the tech space we're actually at the time far more focused on the spiraling WE Company, the company behind we Work that was supposed to go public the week before Peloton, but ended up scrapping those plans because of lots of valid and crazy reasons. But that's another story. Now, it's possible Peloton would have been on a steady but slow trajectory, except then we get

to the pandemic. In early with the threat of coronavirus out there, a lot of people were lamenting the fact that they did not feel safe going to the gym, and heck, a lot of places Gems were closed, right,

so you couldn't go even if you wanted to. And that showed off the real benefit of Peloton, right, like, you don't have to go to the gym, you get one of those expensive Peloton machines, whether it's a bike or it's a treadmill, and you take classes at home that you still get the benefit of a professional trainer pushing you to your limit, but you don't have to leave the house. And Peloton sales took off, as did the company's stock price. There were some pretty big setbacks too, though.

For one, in May one, the company issued a recall for the most recent tread and tread Plus treadmill models due to reports of users getting injured on the devices, as well as a truly tragic report that a child had died in an accident involving one of the treadmills, and that obviously was a huge issue for the company. They had to react quickly to it, and that's why they recalled those those products. When HBO launched its follow up series two, Sex in the City called and just

like that. The show began with the character of Mr Big dying of a heart attack after having worked out on his Peloton bike. Now, that's not the kind of product placement you typically want when you're promoting your business. And to make matters worse, Peloton commissioned and ad featuring Chris Noth, the actor who plays or played Mr Big, to kind of play off the fact that the show had killed off his character and implied that Peloton was responsible.

And the reason I say to make matters worse is because shortly after that ad started to air, the world heard allegations that Chris Noth had a history of sexual harassment and sexual assault. Uh. And obviously it would be a terrible idea to continue to run an ad fee uring Nath in it in the wake of those allegations. So the company pulled the commercial And I told you I would explain the end just like that thing at the beginning of this episode, And there it is. Was

it worth the wait? It was not. Mr Big was not the only fictional character to have a fictional heart attack after working out on a Peloton bike. The Showtime series Billions featured a scene in which a character named Wags has a heart attack after following a similar workout on a Peloton. Wags, however, does not die from the heart attack. He even references the scene from and just like that, he references Mr Big. I'm sensing a meme here. Now.

Before the pandemic, Peloton's stock price was in the twenty two to thirty five dollar arrange, so, you know, leaning into that's kind of where the stock price was hovering. It was not too far off from the targeted I p O price of twenty nine dollars way back when the company first public, but the pandemic would change things significantly.

In early March of twenty the price had actually fallen to below twenty dollars per share, but by October of twenty twenty, after several months of the pandemic, the stock price had skyrocketed up to a hundred thirty one dollars per share. Now that's not its peak. The peak of Peloton stock price went to more than a hundred sixty dollars per share, a huge jump. Peloton's pandemic trend of selling more equipment, however, was not sustainable, and the stock

price would ultimately reflect that. For example, in November twenty twenty as the world was anticipating the production of a viable COVID nineteen vaccine, Like we had just heard the announcement that yes, they were going to be produced and we would get access to them early on in Peloton stock then took a dive. It felt sent because investors were worried that people would, you know, stop buying Peloton bikes and treadmills and just head back to the gym.

So it's weird to think that a a solution or a a way to combat the spread of coronavirus would have a harmful effect on the company, But there you go. Now, Peloton stock price did have a brief recovery, but it wouldn't stay north of a hundred dollars per share for very long. The recalls in twenty one came to time when the stock was in a slide, and it would

slide seventy in value. According to Slate as I actually record this episode, the company's current stock price is around twenty nine dollars per share, right back to that target I p O price and well below that height of

a hundred sixty two dollars per share. That's what it was at in December of twenty twenty, Peloton reportedly overestimated demand for the bikes and treadmills, largely but cause of that huge boom early on in the pandemic, and now apparently the company has warehouses filled with equipment that has so far gone unsold. As such, someone within Peloton not too long ago leaked out information that the company was halting,

at least temporarily, the production of its various machines. Some like the Basic Peloton Bike are on hold from February through March, while the Bike Plus will be on hold through June, and the tread Plus treadmill is not going back into production for the rest of fiscal year twenty

twenty two. The company's stock price took another huge tumble in the wake of that news nearly twenty but John Foley then said that the company was making moves to right itself, which saw the stock price rebound a little bit, and that process of making things right may actually include layoffs in addition to changes in production. Also, the company said that it had identified who had leaked the information to the media in the first place and was now

pursuing legal action, which is big old yikes. Meanwhile, the black Wells Capital lll C company that's an activist investor group, has published an open letter urging Peloton to fire John Foley, s CEO and to seek out a buyer for the company, which is a big old oof right there. Um and black Wells owns about five percent of Peloton stock, so it's influential, but obviously doesn't have like controlling interest of

the company by any stretch of the imagination. But it does sound like they are pushing other shareholders to pressure the company into into firing John Foley and and looking to get bought out. Um. Again, it's an interesting story with Peloton, and obviously the story is not over. Like we could see things dramatically turn around for the company and see that this was just a dark period in the company's history and then it returns to a pretty

prominent place in the tech space. It's interesting to me because obviously the real value in Peloton wasn't so much in the technology. As I said, all the technology Peloton was using existed in some form or another, just had not yet converged into a product like what Peloton offered. But but they did it really well. I mean, apart from the fact that it's prohibitively expensive for a large

portion of the population. Obviously, that ends up limiting your potential customer base all on its own, right, you only have so many people who can afford to buy products that are that expensive. But yeah, it'll be interesting to see if the company is going to be able to

weather this current storm and turn things around. I wanted to cover it because it has been in the news and I thought it was interesting that the company had announced or didn't announce, but had to address the fact that it was halting production on several of it's all of its products really, at least in for temporary basis. Anyway, that is the Peloton story so far, and like I said, unless unless something really major happens, I expect that story

will continue. If it doesn't, I'll be sure to touch on that at the end of this year when I'm covering the big stories of twent two. In the meantime, if you have suggestions for topics I should cover in future episodes of tech Stuff, please reach out to me. The best way to do that is on Twitter. The handle for the show is text Stuff H s W and I'll talk to you again really soon. Text Stuff

is an I Heart Radio production. For more podcasts from My heart Radio, visit the I heart Radio app, Apple podcasts, or wherever you listen to your favorite shows. Eight