As far as indoor bike machines go, the $ 2,245 Peloton bike is nothing special. It has an elegant black and red frame. It has a large screen. It is on Wi-Fi.
But a combination of ambitious infomercials ("This … is fitness developed.") And streaming classes taught by glamorous instructors have led Peloton to sell 577,000 of its bikes and treadmills in five years. Richard Branson is a fan. So are Jimmy Fallon, Kate Hudson and the Obama.
As Peloton prepares to go public, the New York City-based company – which investors have valued at $ 4 billion ̵
For Peloton some troublesome signs have emerged. The company's losses have more than quadrupled over the past year. It is surrounded by legal battles over music and patents. Competitors and copycats are moving in aggressively. And the store's spinning mania has begun to wane.
"Consumer fitness for home use has been through a number of cycles, going back to the 1990s when you had the ab roll," said Michael Swartz, an analyst at SunTrust Robinson Humphrey.
Peloton, which published its offer prospectus on Tuesday, declined to comment in advance of I.P.O. In an interview last year, William Lynch, Peloton's president, said the company had studied the training market's "baggage" and determined that manners of the past failed because they pressed empty claims about results.
Peloton, he said, is focused on bringing "serious fitness" into people's homes in a "fresh and relevant" way with the growing library of classes. "We believe that if we do, our members will stay with us," he said.
Peloton was naturally started by a spin devotee.
John Foley, a technical manager who previously ran Barnes & Noble's e-commerce business, founded Peloton in 2012 and became CEO. He was a supporter of spin studios such as SoulCycle and Flywheel, which became popular for their pumping music, camaraderie and energetic instructors.
But as parents of two children, he found it difficult to get around to class. So he created Peloton to bring the SoulCycle vibe into people's homes.
Mr. Foley, now 48, initially struggled with attracting venture capital funding. For investors, Scar sat down from Fitbit, the fitness tracking company that rode a wave of hype, but stumbled on competition from Apple and Samsung.
"People asked: & # 39; As an expensive hardware game, how big can it be?" Said Hans Tung, an investor in venture capital firm GGV, which invested in Peloton last year.
In 2014, Peloton began sending its Internet-connected desktop bikes with a screen attached, charging $ 39 a month for access to streaming classes. Mr. Foley opened showrooms in malls around the country, where people could test the bikes and streaming classes.
Vicki Reed, a former Peloton marketing manager who retired in 2016, calls Peloton's classes "exiting," meaning they are so engaging that they distract people from what they do.
"They were smart enough to take it and go with it," she said.
Sales rose rapidly. Peloton's spinning instructors became stars, snagging approval agreements and social media. Lively online community of riders emerged, with people applauding each other's workouts, gossiping about instructors and sharing fitness tips.
Jed Katz, a managing partner of Javelin Venture Partners who personally invested in Peloton in 2012, said he was surprised that a training bike could "go viral so fast." Peloton "became a" must have "product," he said.
Crystal O. & # 39; Keefe, 41, a Peloton owner in St. Louis, said she had made so many new friends through Peloton that she travels to New York several times a year for meetings. "It's just a whole new family," she said.
In the prospectus on Tuesday, Peloton revealed that it lost $ 195.6 million in the fiscal year ended June 30, compared to a loss of $ 47.9 million a year ago. Revenue increased to $ $ 915 million from $ 435 million in the same period.
At least a dozen rivals now sell Peloton-style "studio" bikes for as little as $ 199. .
A brand called Echelon, which has raised funds from investment company Jay Galluzzo, one of Flywheel's founders, and offers an obvious knockoff, down to a round black logo, for $ 899.99. Lou Lentine, president of Echelon Fitness Multimedia, acknowledged the similarities to Peloton, but said Echelon's models were less expensive.
In August, Equinox, the parent company of SoulCycle, also announced plans for its own streaming indoor cycling and treadmill classes.
And Icon Health & Fitness, which owns NordicTrack and ProForm, sells internet-connected bikes with a $ 15 and 39 monthly subscription for digital classes called iFit. NordicTrack's bikes and treadmills, which automatically adjust speed and climb as part of the workouts, contain more technology than the Pelotons, said Colleen Logan, vice president of marketing.
"Theirs is really like an old-fashioned spin bike. You just, rrr, rrr, twist it with your fingers," she said.
The icon is increasingly oriented around Peloton-style digital subscriptions. The 42-year-old expects one day to benefit more from streaming classes than from exercise equipment, said Chase Watterson, iFit's marketing manager. The digital classes now have 287,436 subscribers.
Other startups mimic Peloton's model of combining different types of exercise equipment with a monthly flow subscription. The startups Hydrow and Crew are "Pelotons of rowing", FightCamp is "Peloton for boxing", and Mirror offers training sessions on an internet-connected mirror. The companies have raised more than $ 160 million.
"You call the sport and some try to be Peloton for it," Katz said. "Pelotons of X" even has its own copycats: Echelon sells a mirror-like product called "Echelon Reflect."
Last year, Peloton sued Flywheel, which introduced a competing desktop bike and streaming service, and accused it of infringing patents it holds for technology on the bike. The lawsuit has not yet been resolved.
David Chene, a managing partner of Flywheel's owner, Kennedy Lewis Investment Management, said Peloton "failed to disclose" its pending litigation, noting that the Patent Trial and Appeal Board stated that Flywheel has a "reasonable probability of ruling "in their arguments against three of Peloton's patents.
Strong burning trends are fading fast. And spinning is not as hot as it was when Peloton got started.
In February, Randal Konik, an analyst at Jefferies, said that an excessive supply of spin studios in American cities had led some companies to cut prices. SoulCycle pulled its I.P.O. plans last year, citing market conditions. (The company declined to comment.) In May, flywheels were taken over by creditors amid Peloton's lawsuit over patent infringement.
To prevent people from losing interest, Peloton has expanded to other areas, including a treadmill it began selling in 2018 for $ 3,995.
Last year, Peloton also offered digital classes for exercises like high-intensity interval training, barre, yoga, boot camp and meditation – no bike or treadmill required – for $ 19.49. It is a bet that when someone enters Peloton's "ecosystem", they will stay there in all their training sessions. The company counts 102,000 digital subscriptions.
It is difficult to know how many subscribers are included. The company reported that less than 1 percent of subscribers canceled on average each month. But half of the 511,000 subscribers have joined in the last year.
Finally, Mr. Tung said, "There will be copycats here and elsewhere, so it will come to who can execute faster."
Currently, Peloton is for. The company can continue to ride on major trends, such as the boom in fitness spending and the popularity of social workouts, said Swartz of SunTrust Robinson Humphrey. Spinning may not be as hot as it used to be, but he said it "still has legs."
That includes Paul Gerhardt, 32, a tech entrepreneur in Oakland, California. He belongs to a group of 35,000 Peloton riders as a strict style of class called the "Power Zone." His bike is the first thing he sees when he starts the day and when he comes home from work.
"Would I rather have Peloton or Netflix?" He said. "I'd rather have Peloton."