A stationary bike is photographed inside a Peloton store in Manhattan, New York City, US, January 25, 2022.
Carlo Allegri | Reuters
Peloton The company said it quietly removed the free unlimited membership tier on its fitness app less than a year after its debut because the initiative failed to convert users into paid subscribers.
Peloton has dropped the free option for new users, which was previously a key part of the company's growth strategy, over the past few weeks. People who signed up for the company's free unlimited membership before it was removed will continue to have access, Peloton said.
New users looking to get to work with the company's app now have access to just two tiers at a cost of $12.99 per month or $24 per month, with the option of a seven-day free trial.
Last May, Peloton debuted a new brand that described the company as a fitness company for everyone, and put its digital app at the center of its marketing campaign. The rebrand brought a new, multi-tiered app strategy that included an unlimited free membership option and two other paid tiers that all contained different levels of content.
The rebrand came as CEO Barry McCarthy was looking to transform Peloton from a company focused on its hardware to one equally invested in its app. With sales steadily declining at the company, he was working to attract new customers who might be interested in the brand but were not willing to pay thousands for its equipment.
McCarthy, ex Netflix And Spotify The CEO, had long wanted a free tier in the company's app. He's betting that free users will fall in love with Peloton's content and then move on to a paid membership, which comes with a variety of categories, after they've tried the app and decided they wanted more.
It appears that the bet was unsuccessful.
McCarthy told investors in November that the relaunch was “less successful at engaging and retaining free users and converting them to paid memberships” than the company had expected.
Soon after, the free unlimited tier was no longer available
during Morgan Stanley At a conference in March, CFO Liz Coddington said the company learned “quickly” that the free tier was “dismantling” efforts to convert free trial members into paid subscribers, prompting the company to shift 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 opportunities to improve it,” Coddington said. “What we found is that we need to figure out ways to engage them better during the trial period, so that they convert to paying and then keep them engaged over time, so that they can retain at a higher rate. … When we figure out that if we do that, we think our marketing efficiency will improve,” he said. Because we will have a better retention rate and better conversion rates
While app subscribers declined during Peloton's second fiscal quarter ended Dec. 31, Coddington said the company still “believes”[s]” in its application strategy and remains “an important part of the business.”Â
Peloton shares fell more than 6% on Monday and are down more than 45% this year, through Friday's close. The company's market value has shrunk to about $1.2 billion, a fraction of the $47 billion it was worth at the height of Peloton's success during the COVID-19 pandemic.
