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Peloton removes free app membership

by SuperiorInvest

An exercise bike is displayed inside a Peloton store in the Manhattan borough of New York City, U.S., on Jan. 25, 2022.

Carlo Allegri | Reuters

Platoon has quietly removed its unlimited free membership tier on its fitness app less than a year after its debut because the initiative was failing to convert users into paid subscribers, the company said.

Peloton eliminated the free option for new users, once a key part of the company's growth strategy, in recent weeks. People who signed up for the company's free unlimited membership before it was removed will still have access to it, Peloton said.

New users looking to exercise with the company's app now only have access to two tiers that cost $12.99 a month or $24 a month, with the option of a seven-day free trial.

Last May, Peloton unveiled an eye-catching rebrand that presented the company as a fitness company for everyone and placed its digital app at the center of its marketing campaign. The rebrand brought a new tiered app strategy that included the unlimited free membership option and two other paid tiers that had different levels of content.

The rebranding came as CEO Barry McCarthy sought to transform Peloton from a company focused on its hardware to a company equally invested in its app. As sales steadily declined at the company, he was working to recruit new customers who may have been intrigued by the brand but weren't willing to shell out thousands of dollars for his equipment.

McCarthy, a former Netflix and Spotify executive, had long wanted a free tier in the company app. He had bet that free users would fall in love with Peloton's content and then opt for a paid membership, which comes with a much wider variety of classes, after trying the app and deciding they wanted more.

The bet appears to have been a failure.

McCarthy told investors in November that the relaunch had been “less successful in attracting and retaining free users and converting them to paid memberships” than the company had expected.

Shortly after, the unlimited free tier was no longer available.

During a Morgan Stanley At the March conference, CFO Liz Coddington said the company “quickly” learned that the free tier was “cannibalizing” efforts to convert free trial members to paid subscribers, leading 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 many opportunities to improve it,” Coddington said. “What we found is that we need to find ways to better engage them during the trial period, have them convert to payments, and then also keep them engaged over time, so that they retain at a higher rate… When we do that, we think our Marketing efficiency will improve, because we will have better retention and better conversion rates.”

While app subscribers declined during Peloton's fiscal second quarter ending Dec. 31, Coddington said the company still “believes[s]” in its application strategy and remains “an important part of the business.

Peloton shares fell more than 6% on Monday and were down more than 45% this year, as of Friday's close. The company's market capitalization has dropped to around $1.2 billion, a fraction of the $47 billion it was worth at the height of Peloton's success during the Covid-19 pandemic.

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