For sale: One Peloton

Can I interest you in a Peloton? It’s in fairly rough shape, but still more or less does the job. It’ll cost you, let’s say, $10 billion or so. Plus delivery fees.

Rumors are swirling about Peloton’s future. The company's stock is down more than 80% over the last year, it has run into a series of problems with its products, and it seems to be a company in disarray. Amazon and Nike are both reportedly interested in acquiring the company, and a number of analysts and experts think Apple should swoop in and do it.

Is Peloton actually for sale? It's starting to look like it: CEO John Foley is planning to step down, The Wall Street Journal reported, to be replaced by former Spotify and Netflix exec Barry McCarthy. The company is also reportedly undergoing some restructuring on the board, and planning to lay off about 20% of staff.

• It was a $50 billion company a couple of years ago, and its market cap has dropped to about $7.5 billion. And that’s after a big jump that came from the acquisition rumors.
• Blackwells Capital, a large shareholder in Peloton, sent the company a scathing letter a couple of weeks ago detailing what the firm sees as Peloton’s major recent missteps. “With the stock now trading below the IPO price,” Blackwells wrote, “and down more than 80% from its high, it is clear that the Company, the executives and the Board have squandered this opportunity.”

Peloton looks like a distressed asset with a lot of potential. It makes a good product, has a thriving community and seems to offer something a number of people want and like. It’s just not managing the system very well.

So what would its three most-discussed suitors get for their purchase?

• Amazon would get a flagship product for its growing health ecosystem, which currently includes products like the Halo wristband and projects like Amazon Care, its telehealth system. A Peloton subscription could also be a benefit for Prime subscribers, even the ones who don’t own a bike or treadmill. Meanwhile, Amazon would give Peloton a lot of capital and a lot of logistical knowhow — two things it seems to be lacking right now.
• Apple could use Peloton as a selling point for the Apple Watch and Fitness. It would also get lots of data for Apple Health and its other health initiatives. In return, Peloton gets its bikes and treadmills in prominent places in one of the best retail ecosystems in the world, access to the industry’s best supply chain and all the data-privacy features Apple’s been building in recent years.
• Nike would finally have the kind of hardware prowess it has repeatedly tried and failed to build internally. (Remember the FuelBand?) Peloton products could make the Nike Training Club ecosystem more useful and powerful, too. Nike, on the other hand, brings access to sponsored athletes, its legendary marketing machine and high-end fitness brand. Nike could help Peloton go from “bike company” to lifestyle brand, which it clearly wants to be.

Peloton may also be … a metaverse company. Blackwells seemed to think so, and it’s not a crazy idea. You could make the case that Peloton is, in some ways, ahead of the curve: It uses a combination of hardware and software to build experiences that are both personalized and collaborative. Add a camera into the mix — like the one Peloton is already working on — and give users headsets, and every rider could be a digital avatar in a virtual Peloton studio.

But does anybody need what Peloton does well? That’s the real question. Peloton may have been early to the connected fitness game, and remains the industry’s biggest name, but competitors are hitting it from all sides. Tonal, Hydrow and others are building their own in-home exercise systems, while Apple, Nike and others are building their own libraries of exercise content. Meanwhile, people are going back to the gym, and some gyms are investing in their own apps and at-home workout experiences. There’s not much about Peloton that is utterly unique anymore — unless you count Cody, anyway.

• The question for Amazon, Apple, Nike and others will be whether they feel they can beat Peloton at its own game, or if it’s worth $10 billion or so to take a shortcut to the top of the market. If Peloton can turn its fortunes around, it might even have a chance to compete on its own. But it won’t have that chance for long.

— David Pierce (email | twitter)

On the calendar

The changing role of the CIO

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