An image of a stationary bike inside a Peloton store in the Manhattan borough of New York City, U.S., January 25, 2022.
Carlo Allegri | Reuters
Peloton The company said it quietly removed the unlimited free membership tier on its fitness app less than a year after launch because the initiative failed to convert users into paying subscribers. .
Peloton dropped its free option for new users, which had been a key part of the business’s growth strategy, over the past few weeks. Peloton said people who signed up for the company’s free unlimited membership before it was removed will continue to have access to it.
New users looking to workout with the company’s app currently only have access to two levels priced at $12.99 a month or $24 a month, with the option of a seven-day free trial.
Last May, Peloton Launching an emerging brand promoted the business as a fitness company for everyone and placed its digital app at the center of its marketing campaign. The rebranding brings a new, tiered app strategy, including an unlimited free membership option and two additional paid tiers, all with different levels of content.
The rebranding comes as CEO Barry McCarthy looks Peloton transformation from a hardware-focused business to one that is equally invested in its applications. As the company’s sales continue to decline, he’s trying to attract new customers who may be attracted to the brand but aren’t willing to shell out thousands of dollars for its equipment.
McCarthy, former Netflix And Spotify CEO, has long wanted a free tier on the company’s app. He bet that free users would love Peloton’s content and then sign up for a paid membership, which comes with more classes, after they tried the app and decided they wanted more. again.
The bet appears to have failed.
McCarthy told investors in November that the reboot had been “less successful in attracting and retaining free users and converting them to paid memberships” than the company had expected.
Soon, the unlimited free tier is no longer available.
In one Morgan Stanley at a conference in March, chief financial officer Liz Coddington said the company “quickly” learned that the free tier was “cannibalizing” efforts to convert free trial members into paying subscribers, causing the company to switch to a free trial model.
“It’s important to know that our app is still a work in progress. We still have a lot of room to improve it,” said Coddington. “What we realized is that we needed to find a way to engage them better during the trial period, to get them to move to paid, and then also keep them engaged over time, so they would retain at the same rate.” higher rates. … When we do that, we believe our marketing effectiveness will improve, because we will have better retention rates and better conversion rates.”
While app signups fell in Peloton’s fiscal second quarter ended Dec. 31, Coddington said the company remains “confident[s]” in its apps strategy and it remains “a vital part of the business”.
Peloton shares fell more than 6% on Monday and are down more than 45% this year, as of Friday’s close. The company’s market capitalization has fallen to about $1.2 billion, a fraction of the $47 billion it was worth at the peak of Peloton’s success during the Covid-19 pandemic.
