Listen: Is Peloton a Fitness Fad or a Tech Company?
"On this show. We clearly talk a lot about tech companies. There's some some obvious ones apple Microsoft alway and then they're all the startups that have changed our lives in recent years. Like the ridesharing APPS UBER and lift or food delivery companies like post mates and seamless and sometimes we take a step back and think wait. Is that Really Tech Company. We were talking about that with columnist. John on stole the other day and our episode about the luggage company away. And it's something. He's been thinking about lately especially connected to the fitness industry specifically the stationary bike company. Pelton so John's back to continue the conversation with us today. Hey John thanks for joining us. The driven me. I'm not on my Peleton. I just got off. So let's go. Let's go well. We could have been on the phone with you on your pilot and that would have made it so much more exciting but you would it. It would've been very embarrassing. I I'm I'm a low performer. On the Peleton leaderboard okay. So let's back up a little bit. POYTON has been in a battle L. with some of its competitors it sued both flywheel sports and echelon fitness in the last couple of years. What's at stake here? What exactly are they fighting over there? Fighting over depending on which company we're talking about that they're fighting they're fighting over technology patents intellectual property that both sides accused each other her of borrowing stealing lifting copying off their neighbors sort of test scores. So this goes back several years to the beginning of a movement called connected fitness. Basically take a smart tablet like a touchscreen tablet you hook it to your stationary bike and you begin begin. Pipe lining in a live or archived session with a high level instructor. What makes it? Unique is the leader board that is available available with the instructor showing you all the people that are in the class. Not just in the class proper in the physical class all over the world and these numbers can balloon to hundreds the thousands of people and it doesn't matter when you're taking the class it's dynamic in a way that it makes you feel like you're taking the class in real time competing with all these people in real time even if it's a week or a month take the classes taking place. So what is what are they fighting over there fighting over the intellectual property in this idea of the leaderboard. Yeah I mean Peleton a saying we came up with this dynamic with they call time sink leaderboard if you think about watching an Olympic sport like swimming and you watch Michael Michael Phelps. You know trying to break another record. There will be an could be as if he's competing against the old record holder from nineteen eighty-four. Whomever that swimmer was that set the record before you would see Phelps trying to beat that in real time very similar technology that Peleton says it spent a lot of time and money and engineering talent Jalan trying to develop and so fly will if I and the national on second came out with bikes dead operated very similar to its technology did Move to protect those patents not immediately but after those products come onto the market so this is basically an intellectual property dispute in in the fitness world. How strange is that for? This industry are how how common is that. For this industry I think the intellectual property if we take it out of the tech Rome Just the idea that somebody has come up with. A nifty idea in fitness is very common for someone to want to protect that. Whether it's Typo or Zimba Numba or Richard Simmons techniques or the Hula Hoop. I mean there's been decades if not a century of trying to patent ideas that people may have been doing this for for decades or centuries that it's just somebody came up with a better name for it. Those are hard to actually prosecute because the defendants often say this is a very ambiguous idea. This idea of using this specific routine to crunch avs is not novel or unique. I can do it too in. Don't sue me and so they don't often hold up in a court of law. What's unique about Peleton's John's argument here is that they're going into the world of algorithms in data not like sit ups and push ups when you start talking about specific technology that power software anywhere? There is a much more rich and robust precedent of companies being able to protect that sort of Ip and get money have settlements or even cease and desist on the other end. Underline the thing. That's so interesting here. Is that politics is I mean. Obviously lots of fitness makers you named the number of devices making devices is for fitness is also not a new thing but they still call themselves fitness companies. The air really talking about themselves as Tech Company so I WANNA kind of get back to that first conversation that we were having about. What does it take to be attacked company? And why is it important that a ride sharing APP or Salads Delivery Service or luggage company is calling themselves attack company. Why is that so common now and why is it so important? I think I think there's a couple of things if you unpack that idea. So the technology enables better life and it may enable enables better usage so if I'm a typical stationary bike rider later. I'm going to be bored to death after an hour. It's not going to happen for me with my short attention span so I have to turn on television and listen to music and even that can get old and I'd be like I'm just GonNa go outside and go on regular your bike or do something else. So there's the boredom factor there's also the lack of community factor in fitness particularly Solar Solo Sports. That make them rather dull and so so when you can bring technology like Says it has into the equation that actually makes people addicted to the type of even if it pseudo community that exists all over the world at the same time competing against each other. Instructors do it through the Internet software data algorithms and have a living testament in real time to how well you're doing you begin to talk about having a solution that people would see as technology enabled and not just fashion you know belts and and nuts and bolts. Why that's important is it could be the thing that enables breakneck growth? Not just fitness industry type of growth but tech company. Any sort of growth. We're talking double digits. Year over year expansive massive growth at propels a company like to the billions of dollars of revenue range. That is very atypical for a single fitness company. The place where I work out lifetime fitness taken like quarter-century to get to a billion dollars in revenue Peleton's tons track has been a lot faster. So you've got that you've also got the ability to charge more and ask investors to value you hire when those metrics bricks are actually working out so subscriber growth has been very robust at collegehype. Meeting People Shell Out Thirty Bucks Forty Bucks a month for Peleton's subscription way more than spotify defy or Netflix or Amazon prime to have access to the content and the real real time competitions and putting go back to investors and say look. This group is what they recall sticky. They're going to keep coming back. It's a endless source of revenue for us. We're not just selling a bike. Were selling a service and that really is often what we think of when we talk about it enabled the technical solution and so then investors start to say well okay. The typical fitness company gets this kind of multiple but Peleton's worth eight and a half billion dollars because we see them as a tech company upholding. Narrative is really important. Yeah and I mean we've seen other companies kind of fall from grace very publicly. We talked what about we work. They're valued at one billion but they were supposedly worth forty seven billion until investors basically realized yet. There's not as much tack here as just like take a landlord. Is there a danger in that kind of Thinking that kind of valuation we're finding out the pitfalls and the benefits fits in real time so we were a great example going from the forties of billions of dollars evaluation. To eight billion. Almost overnight is dramatic and intense but a company like uber or or lift which have filed appeals in the last year or so have really struggled to get over the initial evaluation and you don't invest in a company just for it to remain stagnant. You might as well by a bond if you just want a fixed income. You know that doesn't deliver much growth. The IPO Uber was supposed to be the sort of thing that skyrocketed so yeah there's companies that position themselves as tech companies and then investors start to figure out or asking scratch their head. Is this company really company. I think Peleton's valuation is much more modest that said they have struggled to get over the initial IPO price and they've shown some weakness in the months since they filed nothing to to do with the tech but more to do with the brand and so a lot of people would argue Peleton's a great marketing and brand company. But when they make a mistake like putting on an ad that a lot of people see a sexist Texas you see the the share price gets hit pretty hard and maybe it shows that this company just has a really strong brand that means to protect in that technology. Now on the the other side of the foot you've got tesla which for years has been talking about being tech company and has been valued very often like a car company and all of a sudden as they start to prove out the main player in the electric vehicle technology sector. There were eighty ninety one hundred billion dollars while lead the other guys in the dust. What kind of impact can this? The expanded definition of Tech Company have on an industry. We we've just been talking about the fitness industry. We're seeing it. We've seen it play out in some others. What kind of what kind of impact does it have? Well I think you can get everybody rushing to prove that they're also a tech company. You look at some of the alleged copycats in Peleton's wake it's not just. The companies is that they're suing. It's Nordic track it's it's bowflex it's makers of rowers and elliptical machines. treadmills all in all trying to tell the consumer or now that they too are tech companies. They may not even be striving to go public but they they do have investors and they do have employees and they do have customers that I'll also need to believe believe. Hey I don't want to just by the run on the treadmill for a few hundred bucks if I'm in the market I'll spend more if I can get more and so a lot of the conventional players begin acting like tech companies binny's whether that succeeds or not is a sector-by-sector it's very hard for a Marriott. For instance to convince people that their AIRBNB and other company see that's about to go public and has convinced everybody because of the efficacy in the in the ease of use of its APP. People say this is Tech Company. Even though it's a hospitality company it also also creates this kind of momentum and energy on the positive side can create momentum and energy where you get new entrance all the time so we may see better solutions to all kinds of exercise issues or even a lowering of the cost of entry. Peleton cost twenty five hundred bucks. I mean this is a first first world like premium one percent type of product. This is not for the masses. But maybe you'll start to see more companies crowd in as the cost of the technology comes down down as the amount of people wanting it so that the scale rises you begin to see better. Solutions Typically come in the market not always the case but sometimes the case that an industry can get better when they started thinking a bit more about the how technology data could make them better. It's a fascinating conversation. I'm sure we're going to keep having it. John Still thank you so much true joining us and that was your tech news briefing. I'm Correo come from the Wall Street Journal in New York. Thanks for listening."