Peloton is doing what?

Peloton, which makes exercise bikes and live classes, announced it's working a game to get bike owners cycling. It feels like everyone wants to get into games recently, so I'm not too too surprised. But why is Peloton making this move?

For that, we have to look at a little thing called revenue.

Let's rewind a few years. Peloton, which organizes and streams classes, was doing very well before the pandemic. It went public in 2019, and demand for its bikes was increasing at a healthy rate. Then came the pandemic that locked everyone at home with no access to gyms, and while bike orders went through the roof, Peloton was busy capitalizing on another element--in-app content.

Peloton offers workout videos delivered via app at about $13/mo.

At the end of 2019, Peloton was adding about $10K/day of net revenue from content through its app in the U.S. By April of 2020, net revenue had already more than doubled to $25K/day, according to our estimates. Daily revenue doubled again by the end of summer, with $50K/day in August of 2020, and in June of 2021, net revenue was hitting six digits.

How does this tie back to games? Working out requires discipline, and while some have it, more don't. That's why we see demand for workout apps skyrocket in January, only to decline by February. Every year. With a game, Peloton can literally gamify the workout experience, hooking its audience and making sure they continue to use its equipment and app.

Another way to say it is, Peloton is going down-market because there's a lot of opportunity for growth there, and a game is a very easy way to do that. This is a trend I've been seeing with a lot of companies and one that I've been betting on for a long, long, long time.