Running Toward Connected Fitness with John Foley (Peloton) | Disrupt SF (Day 2)
2:58AM Sep 7, 2018
One of the big successful stories over the last couple of years has been the peloton where you can sit down race in a actual live scenario. get your heart rate up and is incredibly good for fitness. And it's transform the fitness game with internet controlled stationary bikes. So founder and CEO john Foley is going to join us now to discuss the unicorn companies rapid growth in the world of high tech fitness. Please give a round of applause to him and once again Now the one the only Brian heater coming back again to discuss the Peloton. Round of applause, everybody.
Hello. I'm actually I want to start off with a similar question to the one that Mike asked the last panel.
so, how many people here own a peloton product
wow 10,000 That's awesome.
I'd say there's 200% saturation right now. So the company was founded in 2012 year after that peloton ran a Kickstarter campaign to raise funds for the first stationary bike these days you have was it. 250,000 members? Is that right?
Close to 300 now? Yeah,
Close to close. So there's some news right there close to 300,000 members. You've got the bike you've got the treadmill prior to all this. You You were kind of all over the place. I think we have similar career trajectories and that we've we've basically worked everywhere at this point you write
your journey man.
Yeah, you were at Evite, you were at Ticketmaster and more recently, you were at Barnes and Noble. So I want to start by asking you about the lessons that you've learned working for a company like Barnes and Noble,
Barnes and Noble. I joined in 2010 when we were being disrupted,
You were being disrupted.
you were not doing the disrupting.
Yeah. I mean, you guys followed it like header. We're talking Amazon, right? The toughest companies to compete with in the world.
But my colleague, William Lynch, who's Now interestingly, at peloton, he he was the CEO of Barnes and Noble brought the Nook hardware and software platform to market. The Nook hardware and software platform is a platform for consuming content at home. As you would guess, as is the Kindle
very similar to what peloton does. Obviously we built a hardware and software platform that allows you to consume fitness content in the home. So the parallels and the learnings that took place at Barnes and Noble where we're interesting to you know, in the context of peloton if you're asking specific specifically about how the time was at Barnes and Noble competing at Amazon, you know undercapitalized too little too late it was it was tough as you can imagine.
So, I mean essentially when you move on and found your own company, you you have to sort of you have to see that recognize that space in the market. Technology is really big. Fitness is really big. There are a lot of companies who are trying to you know, sort of walk the line between the two. Fitbit is probably a pretty good example of that. But when we had spoken before you essentially told me you didn't feel like anybody was really doing a good job with fitness and tech at the time
yeah obviously Fitbit is a good wearable tracker now watch GoPro is loosely in fitness because there's you know sports related
People do activities
People do activities
that's right there's some things in and around but for creating fantastic experiences at home instructor led group fitness bringing the community and bringing the best instructors the best software the best hardware to create these high energy instructor led group fitness classes you can consume on demand so you think time shifted like Netflix when you want where you want on a the best hardware and the best software the with the best instructors ever. We're doing something that's never before done, obviously
So the company's obviously doing quite well now but it sounds like in the early days you had a lot of difficulty attracting investors to the idea actually kind of all along the way to to get people to involve in it to get people to invest in it. I'm wondering what is it that they didn't see? And if you had to go through it again, what would you have done differently
it's funny Brian it took us took three four years to get the first $10 million to get peloton off the ground. And the first hundred checks came from angel investors because institutions wouldn't invest and the pitch would go something like this. We're going to build a tablet computer four times bigger than an iPad, we're going to build the best bike ever created. A lot of venture capitalists don't like hardware, they like pure software plays because of all the the scale and the infinite scale and less capital required. And they said, Well, how are you going to get the media and I said we're going to create a media division and we're going to stream our own content, you know, 12 hours a day.
And put those things in the on demand cloud so they can be taken after the fact. So we're going to be a media company as well as a hardware and a software company. And they said, how do you how you're going to sell them? I said, we're gonna open stores around the world, we now have 60 stores around the world. And they said, How are you going to deliver these things? And I said, we're going to create a logistics division and deliver them ourselves
We're going to do everything, the hard way
We're going to do everything. And because we have a very high bar for the experience we want to deliver. And these guys, you know, we look at me and say, you know, the tough thing about this as it sounds really hard, it sounds really capital intensive. And the challenges you don't know if there's a market for this product, even if you can do all this, you might fail because nobody buys these things. And I said, people want great fitness experiences at home. To the extent that fitness equipment has never worked in the home is because it was a hardware concept. People would put hardware in your basement and it wasn't fun. I knew from going to the boutique instructor led group fitness classes I said there's something magical that happens in this room with the instructor in the other people in the energy, the music and the motivation.
The whole program that is a class whether it's yoga or boot camp or or cycling, I know that that's something special. And I know that we can digitize it and bring it to the home consumer. So I saw it. venture capitalist this was the frustrating end of the meeting would be no thanks, john. We can't invest in this but if you build it let me know because I want one of these things. And I'm like, Come on guys. What are you talking about? A little ironic, right
so I you know, I can I could either go down to Shenzhen and and like, go assemble my own Android tablet or there's like 8 million OEM out there. There's a lot of companies that do tablets why why is it makes sense to design and create your own?
Well, to the extent that there is a whole cottage industry of contract manufacturers that you can engage with your actually, you know, arguing for it because you can just go tell one of these contract manufacturers partner with them and say I want it to be 22 inches I want it to be waterproof. I wanted to have an aunt plus chip to pick up your artery monitor I want to have a powerful speakers so the music sounds great. I want to have you know projected capacitive touchscreen that's a, you know High Definition Retina display and you can dictate exactly what you want and they'll make it for you. So versus take somebody else's tablet and put it on our own platform. We said let's vertically integrated control the whole experience
What does it mean to be weirdly profitable?
So when you think about the companies that are celebrated in tech, you think about companies like Tesla, Uber you know long list of companies Tesla is a 14 year old company they're losing billions of dollars a year Uber's losing billions of dollars a year peloton is four years in the market and we're profitable I say weirdly, because it's incredibly a typical for a company that's more than doubling top line every year growing, you know, at hyper growth to still be profitable. I mean this this soon, so I say it's weird because it's a typical It's not weird for me because I'm a very fiscally disciplined operator, an entrepreneur
so you've got you know, you've got that certain that top level consumers I mean, obviously, these aren't cheap devices by by most of our standards you know we're talking like 2000 $4,000 so there are those people that are willing to pay that much for a product but I mean is there is there a saturation beyond that is there a way to sort of appeal to people who can't necessarily afford that
for sure and there's two answers to that Brian one we just launched last month the peloton bike for $58 a month through financing with a firm we're covering the financing zero percent financing the consumer so $58 gets you a peloton bike in your home that scales between you and your partner if you're two adults living in the house so it's $29 per per adult that starts to get down to Planet Fitness style economics $29
you're talking like a gym membership to
a gym membership exactly
You feel like thats as fulfilling have an experience as the full gym experience at home
well having a peloton bike it's the best cardio machine on the planet as rated by Men's Health a couple years ago. You can't get the best cardio machine on Planet when you go to to the gym The other thing I would say Brian is if you have your own hundred dollar spin bike or or $200 trip $500 treadmill that's 10 years old in your basement you can download our iOS app and very quickly our Android app or our web app and take a instructor led peloton live class tomorrow morning from your home without buying our hardware so we are plant platform agnostic with our content our classes streamed to other platforms you don't need to buy our hardware to consume our fantastic classes
it's interesting because he obviously everybody wants to be a lifestyle brand everybody calls themselves a lifestyle brands so when you have a product like this again that is it is a it's a home device you know you I know you got in last night you know we're all staying at hotels around here like how do you how do you keep that experience going like how do you make sure that the the peloton lifestyle whatever however that's defined continues beyond where you're you know, sitting on a bike in your basement at home.
Well, one of the one of the ways you do it is through lifestyle apparel so we sell hundreds of thousands of athletes have you have peloton branded athletes your studio to street some of the women in the audience some it's some of the best athletes your apparel in the category and as peloton branded and we sell hundreds of thousands of units of this stuff for men and women for people who want to say I live a healthy lifestyle I
used to be like walking down the street and be like a peloton
well if you're talking about traveling we partnered last year with Starwood to put peloton bikes in western so the if you're traveling to Boston for a week and you want to continue getting your fantastic peloton workouts in the morning, you can do it from a hotel. I don't know whether I'm answering your question or not.
So, okay, so we're really profitable, you know, either but somewhere between 250,300 thousand people all of I'm sure all the skeptical investors that you're talked to in the early days like understand that you're doing really well. So the next logical question is when does a company go public?
I'll answer that question to second the to call the 300,000 subscribers is effectively 600,000 home riders that are addicted to peloton a ride and peloton bike in very quickly the peloton treadmill. Because the two x multiplier back to at scaling within your house, it's generally husband or wife or partners. So, 600,000 people are in the peloton, and then the app businesses hundreds of thousands of other people, the commercial businesses, another hundred thousand in the studio so more than a million people are in the peloton at this point to your question Brian about going public. We just did a very big series f last month led by TC V and a guy named Jay Whoa, who's on the Netflix board joined our board our board and we're very excited about that relationship. So we now have you know, call it $600 million on the balance sheet and we are profitable so when you think about going public as a financing event like some other companies that need more capital might do we have some flexibility that said I
We're targeting next summer just because it feels like the right time will be in Europe will be in Canada with our tread will be alive. We relaunched our digital platform so that you have all the yoga and all the outdoor running and all this other digital content that you might want. So some of these acorns that we're that we're investing in will have started to sprout next summer so that the discount that investors will give us isn't going to be as drastic next summer as it would be this year.
So let's talk about European expansion for a second. Do you feel that the US market has been fully saturated at this point?
Absolutely not. I'm going to tell you. When you think about the 300,000 bikes we've sold there are 63 million Americans with gym memberships. That's a big number. And by the way, it's growing rapidly. In 2000, there were 30 million so more than double in the last 18 years. So 63 million Americans paying hard money month after month to access what is quickly inferior. Your fitness equipment the peloton treadmill that comes out next month is the best treadmill in the world and the best in the peloton bike is the best bike in the world. They're not at your gym. They're in your basement. So to the extent you want the best equipment with the best software the best instructors the best location is called peloton and your home. So when you think about the 300,000 bikes that we've sold, how many millions 10s of millions of Americans are going to be peloton households in the coming years? We think a lot
Oh, so you've got to be keenly aware more so than probably you know, even anyone in this room that that fitness is is very trendy, right? People get very excited about something you know, and this has always been the case with you know, you're like you're rowing machine that you buy or anything else that you get excited about. For a while. Fitbit had a similar problem. You buy Fitbit, and it goes in the drawer. How do you how do you make sure that it's more than a fad like how do you actually continue that engagement across the life of the product and beyond that
yeah I know Brian you were saying you're a big zoomba guy before I knew that you were even
don't remember saying that but going to escape guys I guess
no you're right there the category has been played with fads and trends like that.
What makes me bullish on peloton is that peloton is fantastic cardio fitness against very core fitness. verticals cycling and running are the two most efficient ways of getting your cardio so to the extent that you have a peloton bike in your in your home gym or basement and a peloton treadmill the efficiency of getting your heart rate up cycling and the low impact as we as we get older is the best is the best way to get your cardio and the peloton tread. Interestingly if you know Barry's bootcamp or orange theory some of the cycle training where it's full body half of the experience for the peloton. tread happens off of the treadmill so the instructor on this massive screen that's two and a half times bigger than the call.
on bike screen it's 36 inch screen its massive with the front facing sound bar the instructor will say Brian get off you know or class get off the treadmill, grab your medium weights and now we're going to do some arm exercises and some push ups and some planks and some bodyweight exercises. So by the time you're done with a 45 minute peloton tread workout you have a had just the same cardio as you have have on the peloton. bike but your whole body is, you know, screaming Thank you. And you and you feel fantastic
screaming screaming something. So. So the the treadmill sort of like the base of that. And this is the the ideas are kind of extended beyond that. So you know, you have this device there. And there are sort of other exercises are ways to get more out of the workout. And then just sort of that that cardio element
and the programs will evolve over time. You think about sitcoms and 80s sitcoms today are much different than they were 30 years ago. So to the extent that the media sensibility the music the programs, the language the you know the format is going to change and evolve and it does every day we launched new, you know Tabata rides or hit rides are all kinds of different styles of content.
When we launched the platform four years ago, we had a lot of 45 minute classes. We learned from our community that they want a lot of, they want more 30 and 20 and 30 minute classes. Because sometimes you wake up at 630 and want to get a 20 minute workout, you need to be in the shower by seven, you still want to be a get a, be able to get a fulfilling 20 minute workout. So we've changed some of the you know, we listen to our members. So a lot will evolve on the media. But the bike itself is you know, biking and cycling, stationary bikes and treadmills. Don't feel faddish to me
so you as you said you've got the number one and two from from the standpoint of category you know you've hit the number one into you know, exercise categories with with the bike in the treadmill. So for a sort of like projecting out and looking at what's next for peloton, does that mean we should just figure out what the number three and four are
You could guess. So we're working on number three and four today, to be honest,
we are what I say our team, we feel like our true north is technology and innovation is is who we are. We have 900 people in the company. We operate out in New York City. And we are some ambitious entrepreneurs at our blood and we want to innovate. So we're certainly not going to rest with the first two products.
But But can we expect these sort of large pieces of home fitness equipment to continue to be the core strategy of the company going forward?
Sure. Although when you think about and you know, you've read the Steve Jobs, books and studies like I have, hopefully when he got back to Apple the first or second time one of his biggest things was to streamline and go too much fewer products. So we're not going to be one of these fitness equipment manufacturers that has 16 variants of ellipticals and all kinds of fringe equipment. I think there's just a few products that anchor great fitness and efficient fitness and then the variability will come in the programming that comes more scalable way through software and content
How important is it to the sort of mission statement and the idea the the impression of the company that these be premium products from a price standpoint? I mean, does it make sense to come out with a cheaper version of the bike or treadmill?
That's a great question that we debate as you know, Apple is the most expensive products in their category. They're unapologetically premium
but they are you know, you can't get a cheaper version of the iPhone
you're right but I think the 4C was not a success, right? People for some reason that they tried it. They thought about it some moderate success. You're right. Brian for us for me, and and the senior team at peloton. We feel it democratizing access to fantastic fitness is an important mission of ours. So it is not tried to remain premium it's actually the opposite how do we make it an affordable access to fantastic fun motivating fitness? And you guys if you guys are you know study America and the fabric of what's happening across the states and in some ways the lower socioeconomic classes need fitness more than the than the affluent classes so we're socio economic
financing is part of that as you mentioned
financings part of it not not forcing you to buy your own hardware you know allowing you whatever type of you want to buy a $99 stationary bike and take our classes and that's the most economical way for you to access peloton then we're excited for you and we're happy to welcome you into the peloton. community
does a does a Soul Cycle model makes sense for peloton?
Not at all.
No. So we can't we can't we can't expect to go to a place and have a bunch of peloton bikes where we can all do it in person.
I don't think so. You know I would say it's like apple or Amazon getting into physical bookstores but we all know that's that's no longer a good metaphor.
Great. Well, thank you so much for joining us.
Thank you for having me, Brian.