What the heck is Peloton doing?

When Peloton reported earnings last week, it wasn’t exactly pretty.

The connected fitness pioneer reported a loss of $1.2B, a drop in revenue and membership, and higher-than-expected churn.

But CEO Barry McCarthy is optimistic, likening Peloton to a 720-foot cargo ship in the process of making a sharp turn at 27 knots.

So what’s his plan?

Reining in the balance sheet, for starters. Think: layoffs, store closures, and outsourcing manufacturing.

Aside from that, it appears he’s embracing two strategic bets:

• Increasing accessibility to Peloton by offering a bike rental program for $89/mo., adding new subscription tiers to the Peloton app, and making Peloton content usable with third-party equipment.
• Cutting costs elsewhere by outsourcing, including a bike with an Ikea-style self-assembly option, and opening up its distribution channels through a partnership with Amazon.

Remember, McCarthy hails from Netflix and Spotify. By sacrificing white glove service and focusing on subscription revenue, he hopes to cut costs and get Peloton’s best asset — its content — in front of more people.

Despite ugly financials…

… there’ve been some bright spots. One Peloton Club, the bike rental program, is on the upswing; subscription revenue actually surpassed hardware revenue; and McCarthy expects to reach break-even cash flow in 2023.

Peloton is also planning to release a rower in time for the holidays. Hopefully, this time, they don’t screw up the marketing campaign.