Peloton's Perplexing Price Increase
Peloton is raising the price of its app subscription.
Well, technically, they're charging the same $16.99 (+HST) price I've been paying but giving me less... and that's the same as a price increase in my books.
What am I losing?
Technically, nothing... because my wife is the only one who uses the app.
But today, she can do as many "cardio equipment classes" per month as she wants, and after December 5th, she'll only be able to do three per month.
I have a few questions about the communication I received via email today, a screenshot of which you can find at the bottom of this post.
1. Three classes per MONTH?
In this case, three is a really odd number because it's not even one class per week.
But perhaps that's the point.
Is Peloton banking on the fact that most people who use the app with non-Peloton equipment (like my wife) will decide that three classes per month isn't enough and upgrade to the $30/month plan instead of cancelling their subscription?
I wouldn't take that bet: the new price is almost DOUBLE what I'm currently paying, with zero incremental benefits.
Did Peloton go deep into their user data and notice that most app subscribers are mostly using non-equipment classes before deciding to make this change?
If I was a Peloton shareholder, I'd certainly hope so.
2. A SIX-MONTH notice period?
Most companies arguably don't provide enough notice about upcoming changes to their subscription plans, so kudos to Peloton for letting me know today about a change that's happening more than six months from now, on December 5th.
But that's a LOT of notice... why so much?
Was an extended notice period offered to incorporate a window for them to backtrack on this change if they see a flood of cancellations between now and then?
3. A greater focus on "Non-Equipment" classes?
After December 5th, my $16.99 a month will give me access to "Strength, cardio, Pilates, yoga, running, and more classes"... but only three "cardio equipment classes, cycling, treadmill & rowing" workouts per month.
Why would Peloton want to restrict my access to the equipment-based classes?
Perhaps it's because Peloton-branded equipment owners pay much more for access to Peloton classes: $55 per month for an "All-Access Membership" versus the current App Membership price of $16.99 per month, according to Peloton's support page. (See below).
(Curiously, the $30 "App+ Membership is already listed on this page... perhaps existing app users can enjoy current pricing until December 5th, but new users are forced to join one of the new pricing tiers? That might explain the six-month notice.)
Unless the existing $55 tier will be eliminated on December 5th when these other tiers are introduced -- and I can't imagine why Peloton would voluntarily lower the price for people already willing to pay $55/month -- then the $30 tier is for two groups of people:
1. Those who don't want to cycle, row, or use the treadmill, but see enough value in Peloton's "other" classes to pay $17/month, or;
2. People like my wife, who want to use the Peloton app for their cycling, treadmill, and rowing exercise... but don't want to buy Peloton's expensive equipment.
Is this change simply a way to better align price tiers between Peloton equipment owners and those who just want access to Peloton classes, or does this represent a more significant strategic shift in the company's business model?
(After I wrote this post, I came across this CNBC article that offered more context about the upcoming change, and one quote from Tom Cortese, Peloton's co-founder and chief product officer, indicates it's a strategic shift: "″[We’re] now leaning in for the first time to the idea that OK, not everyone is going to bring premium Peloton hardware into their home." So that answers that.)
Is this price increase a smart move by Peloton, or are they risking their consumer base and business by raising prices so dramatically?
Time will tell.
But I'm not optimistic this is going to go well for Peloton.
