New fee at Peloton: 99 dollars for "activation" of used room bikes
Peloton asks new American customers to pay extra for used devices. This is not the only reason why the share price is soaring.
User on Peloton-Bike+
(Image: Peloton Interactive)
Peloton Interactive is accelerating the depreciation of its indoor bikes and other fitness equipment in North America: anyone who buys a used Peloton product from a private individual must pay the company 99 US dollars or 125 Canadian dollars. This "used equipment activation fee" is intended to improve the member experience. For refurbished used equipment purchased directly from Peloton, the fee is already included in the purchase price.
In addition, of course, there is the monthly subscription fee of 44 dollars (55 dollars in Canada). For the one-off activation fee, the company promises virtual support in setting up the devices correctly, for example adjusting the seat height, as well as insight into a summary of usage data. The latter allows new customers to estimate how much use their indoor bike, treadmill or rowing machine is really getting.
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In the short term, the fee will put a little money in the tight coffers, but in the long term it is likely to reduce the market value of Peloton equipment. The loss in value is already clear; while new Peloton bikes cost around 1,500 dollars in the USA, used ones are traded for 300 to 500 dollars. The new fee is likely to further depress used prices, which will also make the purchase of new equipment less attractive.
The Peloton crisis
Peloton Interactive combines its fitness equipment with online fitness courses and software that offers, for example, statistical evaluations and enables the dislocated but shared use of the equipment. The digital offerings can now also be subscribed to without Peloton hardware. Founded in 2012, the company has been listed on the stock exchange since September 2019. Initially valued at 8.1 billion dollars, Peloton bikes experienced a boom shortly afterwards. The coronavirus pandemic necessitated restrictions on social life, which made the connected indoor bikes popular in the short term. The stock market value reached 50 billion US dollars at the beginning of 2021.
Then came the crash with red figures and at least five waves of redundancies. In May, CEO Barry McCarthy had to step down and there is no successor yet. The situation is modest. The loss of customers continues, with turnover from January to June falling by around 30 million to 1.36 billion dollars. The digital subscriptions for people without a Peloton device are proving to be a flash in the pan, with the number of these subscribers falling by around nine percent every month.
Share price takes a giant leap
However, Peloton returned to positive operating cash flow in the first half of 2024 (financial quarters 3 and 4) and significantly reduced both its operating loss and net loss. To make further savings, the company is now scaling back its advertising campaigns. This is evident from the quarterly document published on Thursday.
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Enough investors believe that Peloton has initiated the turnaround and bought the shares on Wednesday. This caused the share price on the NASDAQ to rise by a good 35 percent on Wednesday. As a result, the market capitalization jumped to almost 1.7 billion dollars.
Bicycle rental gone again
Peloton gave up in-house production in 2022. At that time, Peloton introduced a rental program for room bikes in North America to lower the barrier to entry. For a year, Germans were also able to rent Peloton bikes, but the offer has since disappeared from the German website. Instead, Peloton is now trying it out in the UK.
Incidentally, Peloton does not supply renters with new bikes, but used ones. However, Peloton no longer has enough used indoor bikes of the original Bike model on hand, which is why only the Bike+ has been available to rent in the UK, Canada and the USA since August 1st.
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