Peloton investor Blackwells Capital torched the Peleton founder(twitter.com)
twitter.com
Peloton investor Blackwells Capital torched the Peleton founder
https://twitter.com/codinghorror/status/1491285474761396230
31 comments
Agree - just a skim shows that this is a pitch to sell, and fast.
The deck also overstates and overlooks huge issues. What stuck out first is the claim that there is a lot of IP. While I'm sure they have a lot of patents and copyrights and I haven't read the details, I don't see much that is really protect-able. Many patents cover only their particular implementation, and I don't see where the concept of an exercise bike with attached screen/sound showing taped or live media or coaching sessions is protectable. It seems the biggest moat they have is the existing relationships with the stable of instructors - my question is how exclusive and long are those relationships?
The other is the fact that their products are locked to show no other content. Many people just want to watch their selected content while exercising, whether news, Netflix, or some other selected video; this is possible with most competitors, but not with Peloton.
Considering the deck and those two unmentioned items, I don't see how I'd get Peloton back to some exclusive level, short of signing up every instructor in the country and cornering the market on trainer content (not gonna happen). So, yes, he's desperate to sell, and rightly so.
The deck also overstates and overlooks huge issues. What stuck out first is the claim that there is a lot of IP. While I'm sure they have a lot of patents and copyrights and I haven't read the details, I don't see much that is really protect-able. Many patents cover only their particular implementation, and I don't see where the concept of an exercise bike with attached screen/sound showing taped or live media or coaching sessions is protectable. It seems the biggest moat they have is the existing relationships with the stable of instructors - my question is how exclusive and long are those relationships?
The other is the fact that their products are locked to show no other content. Many people just want to watch their selected content while exercising, whether news, Netflix, or some other selected video; this is possible with most competitors, but not with Peloton.
Considering the deck and those two unmentioned items, I don't see how I'd get Peloton back to some exclusive level, short of signing up every instructor in the country and cornering the market on trainer content (not gonna happen). So, yes, he's desperate to sell, and rightly so.
Presumably a lot of the IP would be the instructor videos with very popular almost-celebrity instructors? Or are they always done live?
> I don't see where the concept of an exercise bike with attached screen/sound showing taped or live media or coaching sessions is protectable
Lawyers. The most absurd concepts can get protected, if you have enough VC cash to throw at your legal team
Lawyers. The most absurd concepts can get protected, if you have enough VC cash to throw at your legal team
They definitely can sometimes protect absurd things, but it sure looks like the exercycle with video screen horse has left the barn, gone over the hill, and is running well into the next state...
Just DDG or Google ""exercycle with video screen", and dozens come up, with the largest brands, NordicTrak, Schwinn, Echelon, Proform, etc., and there's reviews of "Exercise Bikes With Video Screen Compared" [0]. It's just too broad and obvious a concept at this point. Not that they might not squander piles of money trying, but unlikely to succeed in any meaningful way.
[0] https://www.fitrated.com/exercise-bikes/exercise-bikes-with-...
Just DDG or Google ""exercycle with video screen", and dozens come up, with the largest brands, NordicTrak, Schwinn, Echelon, Proform, etc., and there's reviews of "Exercise Bikes With Video Screen Compared" [0]. It's just too broad and obvious a concept at this point. Not that they might not squander piles of money trying, but unlikely to succeed in any meaningful way.
[0] https://www.fitrated.com/exercise-bikes/exercise-bikes-with-...
The thing that kills me is even these investors seem to see Peloton as a hell of a lot more than it is. The “peers” they list are Netflix and Roku. No. Peloton’s peers are NordicTrack and, you know, other companies that make exercise equipment and sell fitness subscriptions.
Yep, the product had all the signs of being a passing fad that hit at just the right moment. I mean, it's an overpriced exercise bike hooked up to a tablet.
I looked at the company back when it started getting buzz and I couldn't see any fundamental differentiation, competitive moat or flywheel synergies. The price-point and space requirements limited the addressable market and the inventory is heavy metal with long lead times plus high carrying and distribution costs. When is Wall Street going to learn to be skeptical of non-tech companies pretending to have tech synergies?
The deck is obviously a typical activist investor hit job designed to highlight the worst aspects of the company's recent performance but my takeaway on Peloton is, after setting aside all the over-hyped expectations (which never should have been believed), I'm actually somewhat impressed by how well the company has managed to do for what it really is. In an alternate universe where Peloton never went through the hype-cycle, never took too much money or tried to grow too fast, there's probably a sustainable business there.
I looked at the company back when it started getting buzz and I couldn't see any fundamental differentiation, competitive moat or flywheel synergies. The price-point and space requirements limited the addressable market and the inventory is heavy metal with long lead times plus high carrying and distribution costs. When is Wall Street going to learn to be skeptical of non-tech companies pretending to have tech synergies?
The deck is obviously a typical activist investor hit job designed to highlight the worst aspects of the company's recent performance but my takeaway on Peloton is, after setting aside all the over-hyped expectations (which never should have been believed), I'm actually somewhat impressed by how well the company has managed to do for what it really is. In an alternate universe where Peloton never went through the hype-cycle, never took too much money or tried to grow too fast, there's probably a sustainable business there.
Totally, the problem is all expectations. I bought a NordicTrack S22i (their peloton competitor) in early 2019, and love it. I pay like $450 a year or something for my family subscription to them and occasional maintenance on the hardware. Pretty sure NordicTrack has a decent profit margin and is a nicely sustainable business given that my mom had a NordicTrack 30 years ago.
They have the same features as Peloton in terms of classes and stuff, but nobody is looking to them to be the next Netflix. That’s the space Peloton is playing in.
They have the same features as Peloton in terms of classes and stuff, but nobody is looking to them to be the next Netflix. That’s the space Peloton is playing in.
I disagree, and think that it could be a decent profitable company in the long term, as long as they can maintain premium brand status.
That said, anyone who bought into the idea that it would have margins and scaling like a tech stock had/has their head in the clouds.
That said, anyone who bought into the idea that it would have margins and scaling like a tech stock had/has their head in the clouds.
The problem with "premium" gym equipment is that ultimately it doesn't matter. It's not similar to other hardware which allows you perform your task better, like a faster laptop, phone with larger battery, washing machine that is quieter and more energy efficient. Your muscles do not care that you are pedaling or running on a $2000 piece of equipment compared to a $500. Your heart can't even tell if you're running or cycling or whatever you're doing besides how much demand there is for blood. Marketing this similarly to Apple seems difficult.
The Peloton experience and loyalty stems from the instructors and the classes - not the hardware.
I have no doubt that there is a market for $2K bikes. There is probably a market for $10K bikes. My skepticism is that you can produce them at 90% profit and double the size of the market year over year for decades.
A version of that slide was in pre IPO pitch decks. This has always been their argument. If I recall correctly, they included projected growth curves too based on FAANG.
You missed Match. Peloton is a streaming dating service.
This is not a good idea. Send a wink or something.. reproduce the whole creeping gym thing.
More seriously has Peloton figured out how to get that in the gym experience where maybe you work out with friends and can talk and see them while doing the virtual class?
More seriously has Peloton figured out how to get that in the gym experience where maybe you work out with friends and can talk and see them while doing the virtual class?
If I worked for Peloton I'd be creeped-out about the higher-ups coming up with a flirting feature, but they could make it opt-in/not enabled by default, and only if both parties swiped right should the winks be sent.
This is purely result of the outcome. They threw the guy under the bus while they invested heavily in the same guy just few years back. It's not like Foley suddenly changed his personality after these guys gave him money. They found him interesting enough to invest with him. (As an aside one can even argue that these investors go out of their way to invest in CEOs who act like psychos as those are the ones who have higher probability of giving those 100x returns). If it had worked, everyone including these same investors and media would hail him as crazy genius ie next Steve Jobs.
They were quite happy with him while things were running smooth but as it soon as things went south, he became the worst ever CEO and suddenly Peleton became the worst managed company in history?
They were quite happy with him while things were running smooth but as it soon as things went south, he became the worst ever CEO and suddenly Peleton became the worst managed company in history?
I never understood their continued push with hardware. CapEx for new factories is high. It seems Foley just believed demand would still be high after the pandemic was over.
Their Peloton digital app has a bunch of bootcamp/strength/yoga etc style classes. Especially with the demand and growth during the pandemic I wondered why the messaging was still on the bikes.
Peloton Digital as being a Netflix for fitness type thing where the focus is to increase subscription count and content. Plus with Peloton digital it’s still complementary when you’re able to go to the gym.
Apple Fitness+ seems like it’s focused on being this. However you need to have a watch in order to subscribe :$
Their Peloton digital app has a bunch of bootcamp/strength/yoga etc style classes. Especially with the demand and growth during the pandemic I wondered why the messaging was still on the bikes.
Peloton Digital as being a Netflix for fitness type thing where the focus is to increase subscription count and content. Plus with Peloton digital it’s still complementary when you’re able to go to the gym.
Apple Fitness+ seems like it’s focused on being this. However you need to have a watch in order to subscribe :$
Friend of mine in the commercial real-estate sector said that Pelton was recently working on leasing space in airport terminals to set up workout rooms.
Really? Like a business traveler with 90 minutes to kill at JFK was going to swap clothes and do a 45 minute spin class?
Maybe it was just a branding/prestige thing. But it seemed really out of place for their business model.
Really? Like a business traveler with 90 minutes to kill at JFK was going to swap clothes and do a 45 minute spin class?
Maybe it was just a branding/prestige thing. But it seemed really out of place for their business model.
Yea definitely seems like a branding thing. Like when I first saw the Peloton stores in the malls it looked so nice. It will definitely catch passerby's eyes see people working out like that in an airport lol.
Also, I do think it will be more commonplace in the future too. Like a SoulCycle/Peloton Room inside a Planet Fitness. I heard somewhere something like that has/is being implemented already.
Also, I do think it will be more commonplace in the future too. Like a SoulCycle/Peloton Room inside a Planet Fitness. I heard somewhere something like that has/is being implemented already.
i am not a buisness traveller. But I would def do a spin class at the airport if they had lockers and showers.
The full deck is actually fairly interesting and pretty brutal throughout: https://www.blackwellscap.com/wp-content/uploads/2022/02/BW_...
That deck is so well done, the way it lays things out about Foley and how he ran the business is a great teaching moment for people in any business. It does a great job of showing what red flag type statements and behavior to look out for in leaders.
This is a bit of a tangent, but the linked presentation brings this up. I cannot wrap my mind around leadership of supposed "tech" companies that has little to no input on the tech of the business.
According to the CEO, Foley, he said he has little to no contribution to the tech and goes months without even talking to the CTO.
The other crazy part is that he was previously the head of e-commerce at Barnes & Noble. Did he also have no contribution to the technology at B&N?
This seems to be a pattern and perhaps the reason so many "legacy" companies are falling behind the tech giants. It seems rather often that I see CIOs or even CTOs and very often CEOs that have no clue about technology. And yet they are trying to preach about how they are doing some huge technology driven makeover to reinvent their company.
According to the CEO, Foley, he said he has little to no contribution to the tech and goes months without even talking to the CTO.
The other crazy part is that he was previously the head of e-commerce at Barnes & Noble. Did he also have no contribution to the technology at B&N?
This seems to be a pattern and perhaps the reason so many "legacy" companies are falling behind the tech giants. It seems rather often that I see CIOs or even CTOs and very often CEOs that have no clue about technology. And yet they are trying to preach about how they are doing some huge technology driven makeover to reinvent their company.
This preaching is heavily driven by investors, who don’t seem to be interested in “boring” non-tech stuff, so everyone and their dog dress up traditional business with tech buzzwords.
Somehow what could have been real hybrid traditional+tech strategy gets thrown with the water during that process, because drafting realistic tech strategy in a field which is totally different from known success stories of FAANG and the likes is very very fucking hard — much harder, in fact, than getting quick investments after putting on an imaginary “tech” facade.
This, I think, is the reason we don’t see real demand for tech-savvy C suite - it’s much easier to hire another guy impersonating Steve Jobs or Elon, and get quick investment rewards.
Somehow what could have been real hybrid traditional+tech strategy gets thrown with the water during that process, because drafting realistic tech strategy in a field which is totally different from known success stories of FAANG and the likes is very very fucking hard — much harder, in fact, than getting quick investments after putting on an imaginary “tech” facade.
This, I think, is the reason we don’t see real demand for tech-savvy C suite - it’s much easier to hire another guy impersonating Steve Jobs or Elon, and get quick investment rewards.
>>get quick investment rewards
quick, but very flimsy
quick, but very flimsy
"2021" sounds clean but is cherry picking after the astronomical COVID bubble.
Pelton is still up 30-50% va 2020, comparable to Netflix.
Pelton is still up 30-50% va 2020, comparable to Netflix.
"Entire household for $39.00 per month compares favorably to ~$300 per month per person for boutique fitness classes"
Surely outside of a pandemic the at-home crowd isn't the same set of consumers that are willing to pay $300 per month for a gym membership.
Surely outside of a pandemic the at-home crowd isn't the same set of consumers that are willing to pay $300 per month for a gym membership.
The trick is to get one of these deep pocketed strategic acquirers (looking at you Netflix) to shell out 20 billion or so in FOMO and buy the company.
But it goes without saying that Peloton did not maintain its growth curve, so a reckoning is due. But WHY did it not maintain the curve? You won't really find that answer in this deck.
Instead, the deck has an agenda: convince the shareholders to force the company to sell. Presumably Blackwells bought a lot of shares recently and would see a nice return if someone bought Peloton at a premium of the current price. Heck, their shares are already up just based on the management changes.
So all in all, I'm going to be contrarian and disagree that this is a good deck. It's good for a single agenda, and it's good if you share that agenda. But it's not good if you want to understand how Peloton really got into this mess or how they could have actually avoided it. Those insights would be far more interesting for figuring out whether Peloton has a future alone or should sell.