Peloton no longer wants to be known as a bike company. After a drop in demand for its signature stationary bikes, CEO Barry McCarthy said the brand is focusing on becoming more of a content provider.
The company has pretty much enlisted everyone willing to buy its pricey bikes, and more people are working out at the gym anyway. So, now Peloton wants to broaden its audience via its fitness class app.
If that sounds like Peloton is trying to become the Netflix of workouts, that’s because it is. Other fitness brands are also increasing their content offerings, including Nike with its Training Club app and Lululemon, which last month added a string of partnerships with boutique gyms to bolster its Mirror classes.
Netflix, too, is facing a similar post-pandemic predicament. Not only are people going out more and watching less TV, but almost everyone who would want to have a Netflix account already has one—or has a borrowed password. The streaming giant is also losing market share to well-funded competition from Disney+, Hulu, and the like.
The two companies might find that a partnering with each other might help them solve their problems. Here’s why the two would make a great duo:
Peloton’s new strategy revolves around digital subscriptions
It may not be widely known, but Peloton’s streamed workout classes can be purchased separately without having to buy any expensive equipment from the company. For $12.99 a month, users can get a subscription for a variety of workouts—such as barre, boxing, or yoga—from the charismatic instructors that Peloton’s known for.
“It’s the greatest app nobody has ever heard of,” said Barry McCarthy, Peloton’s CEO on Tuesday. “And we absolutely need to fix that. Of course, because it’s relatively lightweight, it has the potential to grow rapidly across geographies.”
Expanding the business internationally is also a top priority for Peloton, which plans to first release the digital app in new markets then follow by selling equipment. It has an ambitious goal of hitting 100 million subscribers globally, up from the 2.9 million it had at the end of March. Compare that to Netflix, which already had 222 million subscriptions as of April spread across 190 countries.
If Peloton did special promotions with Netflix, it could gain access to at least some of those customers. Some Netflix subscribers are likely Peloton subscribers as well, but the link-up would help increase stickiness, similar to how Hulu partners with Verizon or Spotify.
Meanwhile, McCarthy also highlighted that Peloton’s user base is heavily female (around 80%) and he wants to see that evolve into a 50-50 male to female split, something that Netflix’s equal gender ratio of subscribers could also help address if the two bundled.
Netflix needs to monetize account sharing
Last month Netflix reported its first subscriber loss in a decade and said it could lose two million more users in the months to come. The company foreshadowed a crackdown on account sharing and said it had already begun testing the feature in certain markets. It said it was not planning on charging full price for each extra viewer, but wanted some kind of premium for users who want to share with family and friends.
“We’re not trying to shut down that sharing, but we’re going to ask you to pay a bit more to be able to share,” said Gregory Peters, Netflix’s chief product officer.
Currently, Peloton has a tiered membership price, with its highest rung allowing users the ability to add 20 different user profiles. Each one keeps track of workout statistics like calories burned or lifting goals. It’s a feature that customers are willing to pay considerably more for—$39 vs the $12.99 for a one-user profile membership.
That kind of tiered system is a harder sell for Netflix—many people are okay accepting off-beat algorithm TV show recommendations because they’re sharing their Netflix account with their brother or aunt. But Netflix customers might be willing to pay more if they could track their workout data with Peloton’s multiple-user accounts as part of their bundled Netflix subscriptions.
And by combining content from the two companies, Peloton would bring a premium customer to Netflix (a Peloton bike costs upwards of $1,200) at a time Netflix is struggling to justify its pricing to new users. Netflix is reportedly planning on introducing a lower-tier ad supported subscription option, after saying for years it would never run ads.
There are other ways the two companies could complement each other. For example, to mitigate long stretches of show binging, Netflix could add a setting that only unlocks the next episode if the user completes a 20-minute Peloton workout.