Peloton: Digitalizing Spinning

Peloton has revolutionized the cycling studio experience, putting significant competitive pressure on trendy powerhouses like SoulCycle

The U.S. fitness industry has expanded exponentially in the last few years, generating $22.4 billion in revenue in 2013 across 32,150 health clubs and 53 million members, nearly double its size in 2000 [1]. About 21% of this growth has been fueled by the proliferation of boutique fitness studios, most notably SoulCycle, in major metropolitan areas [2]. SoulCycle provides cycling classes that offer riders the ability to “feed off the group’s shared energy and motivation to push themselves to their greatest potential. In becoming part of [its] community, riders are instilled with greater awareness of not only their bodies but also their emotions… Its immersive culture of inspiration and empowerment contributes to the engaged and connected rider base in each of [its] studios.” [3]

Riders value the high-energy community feeling of SoulCycle classes but unfortunately are inhibited by (1) cost and (2) access. SoulCycle charges $32/class on average, totaling $130/month for moderate riders who attend once a week, which is 60% higher than the average cost of a fitness club membership [4]. Moreover, certain classes such as those led by popular instructors or held during peak hours are often filled with excess demand. Access is also a problem for consumers who live outside major metropolitan areas, where studios have typically been located.

Enter Peloton.

[ ]Peloton offers a new business model that utilizes digital technology to transform the cycling experience by enabling in-home access to the high-intensity cycling community of SoulCycle at lower cost, eliminating the traditional barriers to entry and access ailing competing cycling studios. Similar to SoulCycle, Peloton offers cycling classes through traditional brick-and-mortar stores at $30/class. However, what differentiates Peloton from the competition is that riders can purchase a Peloton branded bicycle for their home and subscribe to the company’s media platform for $39/month in order to stream classes straight into their homes. The bikes are video-enabled, equipped with waterproof tablets powered by Google Android and specifically built to host Peloton’s full inventory of recorded classes. From the comforts of their own homes, riders can virtually join live classes, post statistics after the class as if they were physically present in the studio, chat with Peloton friends through the platform, or choose to work out on-demand with a pre-recorded class [5]. Peloton allows riders to participate actively in the cycling community, even if they are pedaling remotely.

bike-mat-full“We are more than just a class, a cycling studio, and a bike. We deliver a fully engaging experience with the technology to make every workout effective, and the social connection to make every workout addicting.”

– John Foley (Peloton Founder, HBS 2001)  [6]

At work in the Peloton studio control room

Peloton has digitized the traditional studio business model by building a highly technologically advanced operating model around a subscription concept. Despite the $2,000 price-point of a Peloton bike, the company has emphasized that “the hardware, while key, is not where the money will be made… cash will come through subscriptions.” [7] Therefore, the company is investing heavily in its digital streaming platform and the software engineering team that supports it. Whereas traditional cycling studios focus on developing instructor talent, 20% of Peloton’s team consists of software engineers, while a majority of the rest work in Operations, Customer Experience and Production to improve rider experience with 24/7 customer service. [8, 9]

Furthermore, Peloton’s software engineering team has continuously introduced technological improvements to the tablets on Peloton bikes, which feature high definition video and audio, an interactive user interface that allows riders to easily engage with other riders (video chat, sharing statistics, etc.), and even heart-rate monitoring capabilities that connect to other third-party devices. The key to Peloton’s success is really the high quality, fully immersive, extremely interactive, and all-around fun nature of the cycling experience that it offers, which is enabled by the platform’s innovative technological superiority as well as first mover advantage in the digital streaming fitness space.

“Peloton has inspired a deep and loyal global community to share their passion for fitness, camaraderie and cycling though beautiful hardware, immersive content and robust community.” – The New York Times [10]

Looking Forward

Peloton has certainly captured the first mover advantage in digital fitness. However, the barriers to purchase are high at $2,000 / bike, and I expect competitive pressure from companies like SoulCycle and FlyWheel as they consider digitalizing their business models as well. I think in order for Peloton to continue to grow and increase rider-share, it will need to drastically bring down the price of its bike through increased R&D and manufacturing efficiency. Moreover, over the last year, Peloton has significantly increased its brick-and-mortar presence from 1 to 20 showrooms nationally [11]. While the showrooms do serve as brand ambassadors that bring more riders onto the platform (and thus enhance Peloton’s network effect), I would have expected the firm or its private equity owner Catterton to focus more on the software infrastructure instead of traditional brick-and-mortar offerings. Finally, as a factor of continued growth and innovation, I expect Peloton to expand its current offering to adjacent machines and workouts in the future to bring in added optionality for consumers.

“I used to say we want to be the Apple of fitness. I’ve stopped saying that. … We’re going to make Apple look small-time.”

– John Foley


Word Count: 798 (excluding sources)



  1. Tammaro, Annalisa. “Boutique fitness studios giving traditional gyms a run for their money.”
  2. Ibid.
  3. SoulCycle IPO Prospectus:
  4. Tammaro, Annalisa. “Boutique fitness studios giving traditional gyms a run for their money.”
  5. Catterton Press Release. “Peloton receives $75 million growth capital investment from Catterton, the leading consumer-focused private equity firm.”
  6. Peloton Website:
  7. Platt, Eric. “Sweat, subscribers and the business of spin.”
  8. Peloton Website:
  9. Merced, Michael. “Cycling start-up Peloton raises $30 million.”
  10. Greenfield, Rebecca. “The most exclusive spin class is in your living room.”
  11. Peloton Website:


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Student comments on Peloton: Digitalizing Spinning

  1. As a die-hard SoulCycle rider, it’s difficult to defect. But, I must admit that Peloton is really outpacing the pure brick-and-mortar cycling competition. Catherine makes an extremely compelling case for the value-add of at-home cycling classes versus in-person.

    I’ve been riding for many years, and I believe that the community in the room is the most important aspect of group exercise (especially cycling). With that said, Peloton has deliberately thought through maintaining that community feel by hybridizing the people in the room: both virtual and actually present. This not only provides greater diversity within the group by including more riders of varying skill levels, but, more importantly, it reduces attrition. What I mean by this is that when you attend a cycling class, there are inevitably bikes that go unsold or customers are no-shows. As I mentioned, the community and energy in the room is one piece of the value you pay for as a rider.[1] When there are blanket absences, it reduces that community feel and many riders don’t get the same value out of the class as they would’ve if it had been full. Peloton solves for this by marrying the online and offline community, guaranteeing that energy all the time. I genuinely believe that Peloton provides the rider a higher quality ride more frequently than the average cycling studio from this reason alone.


  2. I agree with you that Peloton needs to lower the price of the bike to stay competitive as other companies emerge with similar technologies. Even though Peloton is a more financially sound investment than attending boutique cycling classes, there are always less expensive options. One that I’ve heard of recently is CycleCast which allows you to stream cycling classes on your mobile phone. I think similar substitutes will continue to come up, and Peloton needs to be prepared to justify the $2,000 price as they do.

  3. Thank you for this post Catherine!

    As a road biker and fan of studio cycling it is hard for me to see Peloton as a possible competitor. Its business model and value proposition are very attractive and I see the potential this company has. However, I do believe that the target market should be completely different than SoulCycle. In my opinion, road bikers and “die-hard” studio riders as Phoebe mentioned above, are people looking to ride in groups, with people that share the same interests in the sport, the same level and want to compete with each other to improve. The community aspect of the sport tends to be as important as the sport itself. Hence I believe is important for Peloton to look for its ideal target market, as this article mentions (1).

    Nevertheless, I love the idea! It is extremely convenient and provides a very broad range of features. Different instructors, classes, DJs, settings etc (2) so in terms of ROI, it is definetely a good bang for your buck!



  4. Similar to pperonto above, I am an avid SoulCycle rider and thus very curious to see how Peloton plans to take market share in a very saturated market of boutique fitness. Catherine’s post makes a compelling argument in terms how the concept is unique in comparison to SoulCycle or FlyWheel – it is accessible in-home, seemingly affordable (once you move past the $2K sunk cost of the bike), and a more technologically advanced rider experience. However, what concerns me about Peloton is that the target demographic isn’t differentiated enough to convert the extremely loyal customers from SoulCycle or FlyWheel over to Peloton’s model. The same people who are willing to pay for $32 for a spin class, are the same consumers who would likely be able to afford the $2K investment in a Peloton bike. As Catherine mentioned, without lowering the upfront cost of the bike, I am concerned that Peloton won’t be able to grow its customer base quick enough to be profitable.

  5. Wow! Thank you for writing such a fascinating and eye-opening post. Being an avid fan of SoulCycle, I was completely shocked by the Peloton concept of purchasing a high-tech bike in order to experience the benefits of “SoulCylce” at home. After reading your insightful post, I did have two concerns about Peloton’s business strategy.

    Firstly, it seems Peloton may be competing with its own brick-and-mortar stores by developing the in-home bike experience. Unless Peloton is fundamentally targeting different consumers or planning on creating a complementary experience, I can picture the in-home bike concept taking away business from in-person classes. Secondly, the reason why SoulCylce personally appeals to me is the physical location of the class. Being surrounded by high-energy riders and a charismatic and challenging instructor is what motivates me to actually push myself beyond my comfort zone. Despite all of the technology embedded in the bike, I worry that because there is no one else holding you accountable, that the in-home bike would not be as motivational of a workout. Despite my concerns, I do believe that the Peloton bike is revolutionizing the home exercise market, but will not fundamentally replace in-person experiences.

  6. Catherine, great post, and thank you for introducing me to Peloton, I had never heard of it. I’ve never been to a SoulCycle class before, but I do participate in the “boutique fitness studio” trend by being a member of a CrossFit gym in Somerville for the last 2+ years, and I have taken classes at Wheel House and spin classes at Equinox. I agree with Lynn, a large appeal for me with respect to the boutique fitness studios is the community and the energy I get from the other people in the class. However, to look at it from a slightly different approach, the $2,000 price tag for a bike doesn’t seem that outrageous to me when you consider the customers who are paying $32 per class at SoulCycle must be making a decent income in the first place. Also, instead of trying to steal customers from SoulCycle, why not just simply market Peloton as an additional option for them. This customer base, making a decent living, is not always going to have a set schedule, and they are probably traveling semi-regularly. I think Peloton could attract customers by offering a similar product to SoulCycle but as a substitution when they can’t make classes, from my understanding Peloton doesn’t offer in person classes, their showrooms are just a place to look at the products.

  7. Great post! I personally don’t know if the company will be ever able to access the market that SoulCycle and other spin studios are serving. To begin with, and as you pointed out, the $2000 price point is a huge hurdle for growth. Psychologically, it is easier to spend $30 a month than a one time $2000. But the price is not the biggest problem for me. First of all, attending spin classes at any of the major spin studios (some cheaper than soulcycle) give you the ability to spin anywhere at any time. I personally used 5 different SoulCycle studios in the same city depending on my schedule and I am sure a lot of people do the same thing. Secondly, spin is much more about the atmosphere of group exercise in a dark room with loud music – something that is very hard to recreate at home. Finally, you need to have a big apartment to be able to fit your own spinning machine, which in big cities like New York or San Francisco can be tricky. Given all the above, maybe Peleton’s target market should be suburban areas where access to standard spin studios is limited and where the size of real estate is naturally bigger.

  8. Great post Catherine! The CEO of Peloton certainly has high aspirations if he plans on making Apple look “small time!” I love the comment discussion going on as to how Peloton will fit in with traditional cycle classes as well as road biking. I agree with Ken that Peloton seems best served as an additional option for studio riders who wish to augment their class schedules with at home riding. Additionally, I could see Peloton doing significant corporate business, as corporate gyms are increasingly employing instructors and investing in the latest gym equipment in order to ensure a healthy workforce. Overall, the most significant hurdle Peloton seemingly faces is generating a similar high-energy riding environment that the SoulCycles and FlyWheels of the world excel at. By live-streaming fellow riders, the best instructors, and great music, Peloton could eventually come close to mimicking an in-class experience. Moreover, the potential to ride with friends from across the world is incredibly appealing. I also like the last part of the article that mentions the potential addition of adjacent machinery as a next step for Peloton. In order to gain a competitive advantage, Peloton needs to add to its convenience factor and offer new workouts that spin studios can’t, including digital strength training.

  9. Thanks for the article. There seems to be a greater influx of these fitness industry startups.

    2 quick points:

    – I’m skeptical about the long-term viability of all these new fitness companies – do you think this is mostly a fad, or is their long-term viability in their operations?

    – What kind of marketing efforts do you see the firm undertaking to make the 2K upfront cost of a bike seem more manageable?

  10. Thanks for this post Catherine! While I too am skeptical of the ability to mimic an in-class experience through such a digital offering, I think Peleton also offers some advantages that traditional brick and mortar studios cannot. In particular, your point around the boutique studios being located in metropolitan areas highlights that there is an opportunity for Peleton to be very intentional about targeting consumers in areas that are currently underserved. This could in fact, ultimately serve as an entry point for their brick and mortar studios as they would be able to leverage their data to identify locations where they have developed critical mass to justify setting up a physical studio. With the $2,000 price point being a significant barrier to entry though, they should definitely look to address this. While R&D could help them to lower the price point in the long term, in the short term, offering a financing option where customers enter 12-24 month contracts could not only make it more affordable, but also lock new customers in for a longer period of time. Additionally, partnering with health insurance companies that incentivise their members to have more active and healthy lifestyles could also be another option. I’m definitely rooting for them and hope to join a Peleton class from my home one day when I’m back in Johannesburg!

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