Peloton’s new CEO has revealed the company is likely to undergo a huge pricing overhaul, in which it will wrap the price of a Bike or Tread into an increased subscription cost, removing the upfront pricing burden.
In his first wide-ranging interview since taking over as CEO for the embattled company, Barry McCarthy told the New York Times business liftout DealBook his plans to change the pricing model.
“You’re going to see us play for scale, for sure,” he told the publication. “And that should mean that we change the pricing model in order to take advantage of elasticity, which I think should significantly accelerate the growth in subs.”
When asked: “how are you planning to change the pricing model to strike the right balance between revenue from subscriptions and products?”, McCarthy answered:
“Selling subscriptions with a really low entry price. Playing around with the relationship between the monthly recurring revenue and the upfront cost to find some sweet spot in the consumer value proposition that gets people to buy into the user experience and affords you a really good margin.”
When pressed on how this model would work, he said of the monthly subscription price: “Instead of $39, it’s maybe $70 or $80. And then the upfront cost is dramatically lower.”
It’s a smart move, given the prohibitive cost of their hardware, and — as the interviewer suggests — everyone who wants a Peloton already bought one. This line of thinking might be better phrased as everyone who wants a Peloton and can afford one already bought one.
McCarthy is clearly aiming at those who want the Peloton, and the lifestyle this brings, but cannot front the costs in one lump sum.
