Peloton Life

Peloton is a common cycling term that refers to a large pack or cluster of bicyclists riding closely together to reduce wind resistance and conserve their energy. The concept goes well beyond cycling; it is believed that birds fly in a V formation for the same reasons, and NASCAR drivers tailgate at 200 mph to reduce the drag as it impacts speed and fuel efficiency.

In 2012, John Foley, Graham Stanton, Hisao Kushi, Tom Cortese, and Yony Feng band together to create Peloton and bring the motivational and fun aspects of an indoor cycling class to the home. In their successful Kickstarter campaign which went on to raise over $300k, CEO John Foley stated that the problem with indoor cycling classes is that too often people don’t have the time, the money, or the access to take such classes. There is truth to this statement. In a 2015 article titled I used to be obsessed with SoulCycle – until I realized how much is wrong with the class, author Mallory Schlossberg shares her disliking of SoulCycle’s SuperSoul package, a feature that allows riders to book their favorite classes up to six weeks before regular booking opens, giving them priority access if they’re willing to pay a premium.

Oftentimes, finding a solution to a problem or a set of problems surfaces additional ones as highlighted by Foley in 2019. “One of the interesting insights when the idea was galvanizing in my head, I was at a Flywheel class in New York City, and I was kind of behind the column, and I kind of had to crick my neck to see the instructor. I was like, I paid $30 to get this bad — the view changed. And I said, ‘If you had to experience a studio, you could have 5 different camera angles, and every seat will be the best seat in the house.’ So through digital media, you can build better experience to a better location.”

In-home fitness has been trending in recent years and during the pandemic, it reached new heights. But in-home fitness isn’t new – it goes all the way back to 1951 when Francois Henri “Jack” LaLanne went on TV to encourage viewers to get off the sofa and exercise.

“Good morning, happy Monday morning to you. Thanks very very much for letting me come into your home. You know, my name is Jack LaLanne and I’m here for one reason and one reason only – to show you how to feel better and look better so you can live longer. Please, keep your dial right where it is because I want to become real good friends with you.”

Referred to as the godfather of fitness for introducing weight training and nutrition to the masses, LaLanne, who passed away at 96, opened his first health studio in 1936 in Oakland, California. At the time, gyms were associated with bodybuilders, weightlifters and the military, and doctors weren’t on his side by saying that working out with weights would give people heart attacks and cause them to lose their sex drive. Despite the initial skepticism, the number of Jack LaLanne studios grew to over 200 by the 1990s, and his TV show aired for 34 years up until 1985.

Looking back at this Coverager piece, the now trending in-home fitness category is indeed the case of a different form of delivery for a need/desire that’s been around for a long, long time. And judging by consumer demand, Peloton is the company that offers the best form of in-home fitness. The company, which counted over 4.4 million global members (inclusive of its ~625,000 digital subscribers) on December 31, 2020, offers two connected fitness products (bikes, treads), a standalone digital subscription product that can be streamed via multiple outlets, and most importantly, a ton of content delivered by a limited roster of just 36 instructors. This is by design and an advantage Peloton has over traditional indoor cycling classes. “I also knew that you get better instructors because instead of 500 of them, you only needed 12. So you could pay more because the model scales,” Foley said.

In recent years, insurance companies have played (and still play) a part in the broader health and fitness category. The most notable player is Vitality, which was conceived after South African insurer Discovery was looking for ways to overcome several challenges as described by founder and CEO Adrian Gore. “There was an undersupply of doctors, an unusual combination of disease burdens, and a new regulatory environment that had zero tolerance for the discrimination of the past, and rightly so. This meant you couldn’t rate customers on preexisting conditions. Finally, unlike most countries, where a national system partially covers risk, there was no unified public health-insurance system at that time.”

The Vitality program, which evolved into a standalone business model used by insurers around the world, enables users to record their healthy lifestyle and earn rewards if they achieve certain goals. Vitality Group, the company behind Vitality, claims to have over 20 million people in 26 markets engaged in the program while stating that by blending industry-leading smart tech, data, incentives, and behavioral science, they inspire healthy changes in individuals and their organizations.

One of the many rewards the Vitality program offers is discounts on gym memberships. For example, in the UK, Vitality members can get up to 50% off a flexible monthly gym membership with Virgin Active. When the pandemic hit and gyms were shut down, Vitality had to figure out a way to combat the reduced physical activity and offer relevant rewards so they launched Vitality at Home, a variety of perks to encourage and reward members from the comfort of their home. One of the perks was 120-day access to Peloton Digital where users can enjoy live or on-demand classes, including Yoga, strength, and cardio among other things. However, this perk has ended despite the convenience and trendiness of in-home fitness, and some users (more tweets here) are even complaining about the inability to earn Vitality points for Peloton workouts.

Hiya Emma, Peloton was introduced whilst members were unable to attend gyms or partake in their regular ways of activity. Any changes that are made will be made clear to our members on the Member Zone. I will pass your feedback on to the team for you – Darren

— Vitality UK (@Vitality_UK) February 3, 2021

For a company that encourages people to make healthier lifestyle choices, it seems discouraging to have limited healthy choices, and that’s without taking into account the impact the pandemic has had on traditional workout methods. Of course, Vitality has to balance between encouraging people to live healthier and a business model that is impacted by the dollar amount of rewards it has to give out to members. And clearly, in-home cycling is more convenient than walking an hour and 40 minutes to achieve 10,000 steps.

The concept of Vitality revolves around motivating members with rewards, yet Peloton’s model is the other way around – members pay to be motivated and gain access to additional benefits. And motivation, which is delivered through the instructors, community, content, and music is the main piece that was missing according to Foley. “35 million American homes had treadmills in them pre-pandemic. So when you have 35 million homes and 5 million treadmills sold in the U.S. every year for decades, that is to say that households wanted to workout at home, they just weren’t great experiences. They buy the tread and then it became the cliché, dust collector and clothes hanger because it just wasn’t fun, it wasn’t motivating, you didn’t have the community, you didn’t have the content, you didn’t have the programming, you didn’t have the music, you didn’t have the instruction, you didn’t have the social software and gamification and all of the sexy stuff that makes a Peloton experience that makes it so sticky.”

As insurers around the world tend to think of Vitality in the context of health and wellness initiatives, Peloton appears to be emerging as a new player in the space. In its Q4 2020 earnings call, the company was asked about the opportunity this category provides considering health and life insurance companies are willing to offer premium discounts for those leading healthier lifestyles. According to the CEO, this is a “massive opportunity and potentially a very big growth vector” for the company in the coming years.

In a Health & Wellness report co-authored by Coverager and SCOR, Peloton is portrayed as a platform that can help life insurers reach health-conscious individuals. With millions of users working out while staring at a large screen, it is just natural for Peloton to incorporate ads in the background without interrupting the workout, after all, in 2014 Foley said that the company can turn into a cable platform and many of its instructors reached influencer status and are being paid to promote different brands. But, Peloton may present another interesting use case for life insurers. The company can take a page from the many credit card companies that frame credit pre-qualification letters as awards by sending notifications to users stating that based on their profiles they pre-qualify for exam-free life insurance. For most Peloton users, achieving this status is the reward.