Peloton’s treadmill recall could cost the company $165 million

By recalling 125,000 Tread and Tread+ devices — and by initially refusing to do so – Peloton made its life a lot harder.

The Peloton Tread+

The Peloton Tread+

Photo: Peloton

Peloton's sales exploded during the pandemic, as millions of people searched for a way to exercise that didn't require going to the gym or being around other people. And business continues to boom: Peloton reported earnings on Thursday, and said it brought in $1.26 billion in revenue over the last three months, while also topping the 2 million subscriber mark. It's expanding to new countries, adding more content and looking for ways to continue to capitalize on a quickly shifting exercise market.

But it's Peloton's bad news that had everybody talking.

The company is recalling 125,000 treadmills, and pausing sales of new ones. "We are working to build and introduce more safety measures, and to help set new industry standards for all treadmills," CEO John Foley said, after acknowledging that Peloton didn't take its existing safety issues seriously enough.

The recall applies to both Peloton models, the Tread and the Tread+, but each for different reasons. The Tread's large screen "can detach and fall," Peloton said, "posing a risk of injury to customers." The Tread+ is more complicated: The CPSC said there have been dozens of injuries related to children and pets, including one child death, from being pulled underneath the treadmill.

The CPSC first issued its warning on April 17. Peloton called the warning "inaccurate and misleading," said there were plenty of safeguards already on the product … and saying that the Tread+ should be kept away from "children, pets, and objects" at all times. Which is tough to do with a 450-pound, 6-foot-long treadmill.

But on Wednesday, Peloton changed course and announced a full voluntary recall. And Foley said it should have happened sooner. "I want to be clear, Peloton made a mistake in our initial response to the Consumer Product Safety Commission's request that we recall the Tread+," he said. "We should have engaged more productively with them from the outset."

Peloton has faced recalls before, like in October when the CPSC found that some of its bike pedals were prone to break during use, which caused leg injuries for some users. That was an easier case: Peloton simply alerted customers and gave them a way to quickly request new pedals for free.

This recall will be significantly more challenging and more expensive. The recall takes three forms. Tread+ buyers can get a full refund through Nov. 6, 2022, and Peloton will pick up the treadmill "in the coming weeks." Peloton will also come out and move the treadmill to a different part of the home, "where access by children or pets is restricted," for free. Lastly, Peloton is working with the CPSC on an aftermarket repair that it will offer for free whenever it comes out. Owners of the Tread, the less expensive model that is currently available in Canada and the U.K. and was scheduled to launch this month in the U.S., only get the refund and repair options. And, of course, no one is obligated to do anything at all.

In the worst-case scenario, Peloton would be stuck having to send a delivery team to hundreds of thousands of homes, all at once, to pick up unwanted treadmills. But by offering to move it, repair it or refund it even 18 months from now, it almost certainly shrinks and spreads that return group. In the refund case, Peloton is basically offering to loan users a treadmill for a year and a half, and a lot of people are likely to say yes to that.

No matter what people choose, Peloton is also updating the Tread+'s software with a new security feature, set to be released in the coming days: a four-digit passcode that will be required every time you get on the treadmill. (Unlocking your treadmill will be like unlocking your phone.) As for the hardware improvements, Foley said that they're coming soon, but noted that "hardware features take time to develop, test, manufacture, and in this case the CPSC will need to review our proposed enhancements."

Foley said on Peloton's earnings call that he anticipates a short-term financial hit, and that Peloton was delaying the U.S. launch of the Tread to sometime later this year. But he insisted that the company would continue pushing forward with content and hardware in anticipation of having things shipping again soon. Jill Woodworth, the company's CFO, elaborated. "It is more difficult than usual to predict our financial results," she said, but estimated the total revenue impact of the recall, from refunds to logistics to the free subscriptions it's offering users, at $165 million.

Adding to Peloton's woes, security researcher Jan Masters found he could access Peloton user data without permission through its API. So far the company has avoided discussing the details of the vulnerability, except to tell TechCrunch that "we took action, and addressed the issues based on his initial submissions, but we were slow to update the researcher about our remediation efforts."

Correction: An earlier version of this story misspelled Jill Woodworth's name. This story was updated on May 6, 2021.

Maria Renz: Gopuff will make it through the fast-delivery slump

Maria Renz on her new role, the state of fast delivery and Gopuff’s goals for the coming year.

Gopuff has raised $4 billion at a $15 billion valuation.

Photo: Gopuff

The fast-delivery boom sent startups soaring during the pandemic, only for them to come crashing down in recent months. But Maria Renz said Gopuff is prepared to get through the slump.

“Gopuff is really well-positioned to weather through those challenges that we expect in the next year or so,” Renz told Protocol. “We're first party, we control elements of our mix, like price, very directly. And again, we have nine years of experience.”

Keep Reading Show less
Sarah Roach

Sarah (Sarahroach_) writes for Source Code at Protocol. She's a recent graduate of The George Washington University, where she studied journalism and criminal justice. She served for two years as editor-in-chief of GW's independent newspaper, The GW Hatchet. Sarah is based in New York, and can be reached at sroach@protocol.com

Some of the most astounding tech-enabled advances of the next decade, from cutting-edge medical research to urban traffic control and factory floor optimization, will be enabled by a device often smaller than a thumbnail: the memory chip.

While vast amounts of data are created, stored and processed every moment — by some estimates, 2.5 quintillion bytes daily — the insights in that code are unlocked by the memory chips that hold it and transfer it. “Memory will propel the next 10 years into the most transformative years in human history,” said Sanjay Mehrotra, president and CEO of Micron Technology.

Keep Reading Show less
James Daly
James Daly has a deep knowledge of creating brand voice identity, including understanding various audiences and targeting messaging accordingly. He enjoys commissioning, editing, writing, and business development, particularly in launching new ventures and building passionate audiences. Daly has led teams large and small to multiple awards and quantifiable success through a strategy built on teamwork, passion, fact-checking, intelligence, analytics, and audience growth while meeting budget goals and production deadlines in fast-paced environments. Daly is the Editorial Director of 2030 Media and a contributor at Wired.
Enterprise

AT&T CTO: Challenges of the cloud transition are interpersonal

Jeremy Legg sat down with Protocol to discuss the race to 5G, the challenges of the cloud transition and nabbing tech talent.

AT&T CTO Jeremy Legg spoke with Protocol about the company's cloud transition and more.

Photo: AT&T

Jeremy Legg is two months into his role as CTO of AT&T, and he has been tasked with a big mandate: transforming the company into a software-driven business, with 5G and fiber as core growth areas.

This isn’t Legg’s first CTO gig, just his biggest one. He’s an entertainment biz guy who’s now at the center of the much bigger, albeit less glamorous, telecom business. Prior to joining AT&T in 2020, Legg was the CTO of WarnerMedia, where he was the technical architect behind HBO Max.

Keep Reading Show less
Michelle Ma

Michelle Ma (@himichellema) is a reporter at Protocol, where she writes about management, leadership and workplace issues in tech. Previously, she was a news editor of live journalism and special coverage for The Wall Street Journal. Prior to that, she worked as a staff writer at Wirecutter. She can be reached at mma@protocol.com.

Workplace

How Canva uses Canva

Design tips and tricks from the ultimate Canva pros: Canva employees themselves.

Employees use Canva to build the internal weekly “Canvazine,” product vision decks, team swag and more.

Illustration: Christopher T. Fong/Protocol

Ever wondered how the companies behind your favorite tech use their own products? We’ve told you how Spotify uses Spotify, How Slack uses Slack and how Meta uses its workplace tools. We talked to Canva employees about the creative ways they use the design tool.

The thing about Canva is that it's ridiculously easy to use. Anyone, regardless of skill level, can open up the app and produce a visually appealing presentation, infographic or video. The 10-year-old company has become synonymous with DIY design, serving as the preferred Instagram infographic app for the social justice “girlies.” Still, the app has plenty of overlooked features that Canvanauts (Canva’s word for its employees) use every day.

Keep Reading Show less
Lizzy Lawrence

Lizzy Lawrence ( @LizzyLaw_) is a reporter at Protocol, covering tools and productivity in the workplace. She's a recent graduate of the University of Michigan, where she studied sociology and international studies. She served as editor in chief of The Michigan Daily, her school's independent newspaper. She's based in D.C., and can be reached at llawrence@protocol.com.

Enterprise

GitHub’s CEO wants to go passwordless by 2025

Thomas Dohmke sat down with Protocol to talk about what the open-source code hosting site is doing to address security vulnerabilities, including an aim to go passwordless by 2025.

GitHub CEO Thomas Dohmke spoke to Protocol about its plan to go passwordless.

Photo: Vaughn Ridley/Sportsfile for Collision via Getty Images

GitHub CEO Thomas Dohmke wants to get rid of passwords.

Open-source software has been plagued with cybersecurity issues for years, and GitHub and other companies in the space have been taking steps to bolster security. Dohmke knows, however, that to get to the root of the industrywide problem will take more than just corporate action: It will ultimately require a sea change and cultural shift in how developers work.

Keep Reading Show less
Michelle Ma

Michelle Ma (@himichellema) is a reporter at Protocol, where she writes about management, leadership and workplace issues in tech. Previously, she was a news editor of live journalism and special coverage for The Wall Street Journal. Prior to that, she worked as a staff writer at Wirecutter. She can be reached at mma@protocol.com.

Latest Stories
Bulletins