Advertisement
Business

Peloton backlash has a silver lining: Holiday season publicity

Peloton exercise system
The increased attention on Peloton might end up boosting sales. Above, a Peloton exercise system.
(Mark Lennihan / Associated Press)

Peloton Interactive Inc. has been pilloried online and punished on the stock market over a holiday ad for its stationary exercise bike that was deemed culturally insensitive. But the backlash could be good for the company in the long run.

The commercial, which features a woman documenting a year in her life with the Peloton bike her male partner gave her, struck some viewers as out of touch — suggesting the already thin “Grace from Boston” was undergoing a strenuous workout in order to lose weight for the guy. The video, released about a month ago, went viral on social media, eliciting a scathing parody by comedian Eva Victor and prompting Peloton to close comments on the official YouTube video.

As the internet buzz seemed to hit a peak this week, Peloton’s stock slid 9%. But some experts say the increased attention could end up boosting sales. The shares climbed 4.2% on Friday.

“They might benefit more because people are looking it up and learning more about it,” said Laura Ries, president of advertising consultancy firm Ries & Ries. It’s still a short-term bump for a company that has historically been largely successful with marketing (it has a total member base of 1.6 million people, including more than 560,000 who have one of the proprietary bikes or treadmills plus a fitness subscription, according to Peloton’s most recent quarterly report). The official Peloton ad on the company’s YouTube channel has been seen by more than 3.6 million people.

Advertisement

The controversy comes at a crucial time for the New York company, which is new to market scrutiny after listing shares in September, as it seeks to capitalize on the holiday sales season and expand in new markets such as Britain and Germany. The shares had gained 27% since its initial public offering before the wave of internet commentary dragged it down Tuesday.

The company is also facing increased competition in the booming at-home fitness market, especially among workout apps. Nike Inc., Aaptiv Inc. and apps such as Kayla Itsines’ Sweat with Kayla have all gained followings for exercise programs available on a user’s phone.

Peloton has been punished by Wall Street for its focus on growth over profitability. The company sells a stationary bike starting at about $2,000 and a treadmill that costs about $4,000, in addition to a basic “connected fitness” subscription plan at $39 a month for those pieces of hardware, and the separate digital apps that don’t require equipment. Its loss narrowed to $49.8 million in the three months that ended Sept. 30.

The stock surged almost 10% on Nov. 29 on reports that the company was seeing strong Black Friday demand. And this month, Peloton lowered the price of its digital subscription app to $12.99 a month from $19.49 in conjunction with the launch of new apps for Amazon’s Fire TV and the Apple Watch, a move that could entice new users.

Advertisement

JMP Securities analysts raised their price target on the stock after the subscription reduction, saying it “broadens Peloton’s reach, improves conversion, and reduces purchase friction.” Ronald Josey, a JMP analyst, said that there are “a lot of good things going on” at the company and that people will continue to buy the bike and other products despite the controversy.

According to the most recent earnings report, Peloton expects its user base to grow to 680,000 or more by the end of its second quarter thanks to holiday sales and New Year’s resolutions.

Scott Galloway, a professor of marketing a the New York University Stern School of Business, said the commercial itself is tone deaf and borderline offensive. But “in this attention-driven economy, anything that gets attention is arguably a positive,” he said. “It’s bringing Peloton into the social discourse on a very regular basis, which is what ads are supposed to do.”

If Peloton could go back in time and choose whether to do the same thing again, Galloway said, “I’d argue they probably would.”


Newsletter
Get our weekly Business newsletter

A look back, and ahead, at the latest California business news.

You may occasionally receive promotional content from the Los Angeles Times.
Advertisement