Peloton announces bold changes to keep members from leaving

It is no secret that Peloton (PTON) has been on a downward spiral over the past few years as members continue to cut ties with the company.

In its latest earnings report, the exercise equipment company revealed that its membership numbers dropped by 6% during the second quarter of this year, compared to the same period last year.

It also generated total revenue of about $606 million, which is 6% lower than the amount it earned during the same quarter the year before.

The decrease in demand comes as Peloton faces heightened competition from rival fitness companies. Consumers are also becoming more price-conscious amid economic challenges such as inflation and tariffs.

“Peloton is a dead company walking,” said Dan Kline, co-editor-in-chief at TheStreet. “It lost its cache and has countless cheaper competitors offering similar devices.”

During an earnings call in August, Peloton CEO Peter Stern said that Peloton will innovate its products and expand its reach in the wellness category to attract new members.

“We plan to support our members’ wellness journeys by expanding our offerings in strength where we are already a category leader: mental well-being, sleep and recovery, and over time, nutrition and hydration,” said Stern. “While we’re exploring new wellness areas, we will continue to build on our strengths in cardio, cycling, running, walking and rowing, recognizing the centrality of cardio for human well-being," Stern added. "We recognize that our members come to us at various stages of their fitness journey. And so a one-size-fits-all approach fits no one.”

He also said the company will use artificial intelligence to “enhance” its equipment’s ability to serve as personalized coaches, deliver individual insights and recommendations, and offer custom-tailored plans.

Peloton announces major changes to product lineup as members flee

As part of this significant shift in strategy, Peloton recently revamped its product lineup by introducing bold new features that better connect to wellness.

The company has introduced its new Peloton Cross Training Series, which includes five connected fitness devices: the Cross Training Bike, Bike+, Tread, Tread+ and Row+, according to a new press release.

Each device has an advanced swivel screen that makes it easier for members to switch among yoga, cardio, strength, barre, pilates, and more.

Each model also features “enhanced audio, superior processors and upgraded WiFi and Bluetooth for quicker, more reliable connectivity.”

Related: Best Buy announces convenient new service as customers pull back

In addition to the new lineup, Peloton is implementing Peloton IQ in all its connected fitness equipment. The software provides members with weekly workout routine recommendations based on their goals, lifestyle, and workout history. It also provides members with insights and analysis through weekly performance summaries.

“While others can offer generic AI workouts or insights derived from incomplete data sources, Peloton IQ and our new Cross Training Series together deliver a more advanced take on AI personal coaching,” said Peloton Chief Product Officer Nick Caldwell in the press release. “We combine a deep understanding of your workout history and wearable data with your real-time performance and your form to give you the guidance you need to meet your goals."

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Peloton is also releasing a new commercial equipment line, Peloton Pro Series that includes commercial versions of its Bike+, Tread+ and Row+. This line of equipment will be marketed to businesses with gyms, such as hotels, apartment buildings, country clubs and corporate wellness centers.

Peloton members should prepare for a harsh new reality

While Peloton’s revamped products for consumers comes with new features, there's a catch. In a recent interview with CNBC, Stern said that the company’s products and subscriptions will be sold at a higher price.

“The products are going to be more expensive than the ones that we had before, but I think deliver a lot more value because now you’re getting a strength and a cardio solution,” said Stern. “Our holiday season is about to be upon us. We sell over 60% of the units across the whole year (during the holidays) ... We’ll get a pretty clear sense of whether we’re hitting the mark in the next few months based on new people that we attract with this cool new stuff, and how we impact the behavior of existing members.”

Peloton’s subscription price increases:

• All-access membership: $49.99 per month (up from $44)
• App One: $15.99 per month (up from $12.99)
• App+: $28.99 per month (up from $24)

Peloton’s hardware price increases:

• Bike: $1,695 (up from $1,145 for refurbished or $1,495 new)
• Bike+: $2,695 (up from $2,495)
• Tread: $3,295 (up from $2,995)
• Tread+: $6,695 (up from $5,995)
• Row+: $3,495 (a replacement of Original Row, which was priced at $3,295)

Dominick Miserandino, CEO of RTMNexus, said raising prices before the holiday season is a risky move.

“Even though AI is the trending word, I'm not sure raising prices in this economy and this timing just before the holidays is the best bet,” said Miserandino. “I'm curious to see how it works out.”

According to a recent report from Bain & Company, the firm predicts that retail sales for November and December (key holiday sales months) will increase 4% year-over-year, reaching $975 billion. 

However, this growth falls below the 10-year average of 5.2%, signaling a more cautious consumer this holiday season. 

Related: Lululemon CEO raises red flag about customer behavior in stores