Peloton’s Ongoing Death Spiral, Sizing up the Digital Fitness Opportunity

Hello everyone. We are getting to the last few CY2Q23 earnings reports. Today’s focus: Peloton. After going over the key numbers from the quarter, we look at the broader market opportunity found with digital fitness. Let’s jump right in.

Peloton’s Ongoing Death Spiral

For the past two years, we have been closely following Peloton’s implosion. Early red flags appeared in the company’s Form S-1 filing (IPO). Jump ahead two years and growth metrics began to deteriorate when the company should have been seeing explosive growth figures.

The Peloton story eventually shifted from being a possible Apple Fitness+ competitor to offering another look into the still young digital fitness space.

Back in May, Peloton unveiled a branding pivot to focus on accessibility (to appeal to more users). New membership tiers for digital fitness classes were also announced. Both came across as not fully thought out. Peloton moved away from its premium workout branding while not moving away from premium product pricing. The result is cognitive dissonance. As for the membership tiers, they are too confusing, limiting, and expensive.

Accordingly, it doesn’t come as a surprise that Peloton’s FY4Q23 earnings had every membership-related line item show continued deterioration.

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More Signs of U.S. Consumers Turning Cautious, Apple Signs Multi-Year Deal With Broadcom, Peloton’s Rebranding and New Membership Tiers

Hello everyone. We kick things off with the fourth largest U.S. retailer sounding the alarms about the U.S. consumer. The update goes over how U.S. consumers becoming more cautious stands to impact Apple. The discussion then turns to Apple signing a new multi-year deal with Broadcom. We conclude with Peloton’s rebranding and new membership tiers. It’s extremely hard for Peloton to come in below Neil’s expectations these days. The company’s new membership tiers do just that.

Let’s jump into today’s update.

More Signs of U.S. Consumers Turning Cautious

On Apple’s most recent earnings call, management alluded to seeing some weakening in iPhone demand in the U.S. This would manifest itself through Apple’s financials via fewer unit sales as upgrade rates slow. In what would only be a partial offset to lower unit sales, iPhone ASP may actually benefit from the development as the phones that Apple does sell tend to be higher end.

There were a few incoming comments from members that sowed some doubt that Cook was telling the full story. How can U.S. consumers be balking on iPhone purchases when the jobs picture is so strong?

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Peloton Launches Peloton Row, What Peloton Should Do With Peloton Row, Spotify Launches Audiobooks (Daily Update)

Hello everyone.

Let's jump right in.

Peloton Launches Peloton Row

My approach regarding analyzing Peloton is changing.This week’s Inside Orchard essay was focused on why it’s now time to begin writing Peloton’s eulogy. We should no longer look at Peloton as a threat to Apple or Apple Fitness+.

However, there are still interesting lessons and notes to observe with Peloton. Specifically, where the hardware versus software balance is found with connected fitness in mind. Peloton believes fitness equipment and software integration are key. My stance is software is vastly more important than fitness equipment when thinking about connected fitness. Apple’s HW/SW/services mantra integration isn’t applicable to every consumer-facing product vertical.

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Apple Sends Out Event Invites to Media, Peloton Is Imploding, A Peloton and Amazon Tie-up? (Daily Update)

The following update was sent to members on August 25th.

Hello everyone. Let’s jump right in.

Apple Sends Out Event Invites to Media

Yesterday, Apple sent out media invites for an in-person event at Steve Jobs Theater to be held on Wednesday, September 7th. It’s been three years since Apple last held a full-fledged in-person product event at Steve Jobs Theater.

Apple’s approach to WWDC was likely a test run for what is in store on September 7th. Apple will welcome press/media/analysts/VIPs/employees to Steve Jobs Theater to enjoy breakfast/refreshments. Guests will then be led to Steve Jobs Theater where Tim Cook will get on stage to welcome everyone. This will be directly followed by Apple playing a taped presentation. Afterwards, the press will be able to check out the new products in the demo area. Apple may even start the taped presentation a few minutes earlier for guests to encourage press liveblogging on social media.

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(Members: Daily Updates are always accessible by logging into Slack. If you haven’t logged into Slack before, fill out this form to receive an invite.)

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Payment is processed and secured by Stripe. Apple Pay and other mobile payment options are accepted. Special Inside Orchard bundle pricing is available for Above Avalon members.

The daily updates have become widely read and influential in the world of Apple and technology. They are unmatched in the marketplace in terms of comprehensive analysis and research on all things Apple. Members reside in 60 countries and hold a diverse range of backgrounds and occupations. They include Silicon Valley executives and investors, the largest Apple shareholders, and the leading Apple journalists in the business.

More information about Above Avalon membership, including the full list of benefits and privileges, is available here.