Peloton removes free app membership

Peloton has quietly eliminated its limitless free-membership tier on its health app lower than a yr after it debuted as a result of the initiative was failing to transform customers into paid subscribers, the corporate mentioned. 

Peloton dropped the free choice for brand new customers, as soon as a key a part of the enterprise’s development technique, inside the previous few weeks. Individuals who signed up for the corporate’s limitless free membership earlier than it was eliminated will proceed to have entry to it, Peloton mentioned.

New customers who need to work out with the corporate’s app now solely have entry to 2 tiers that value $12.99 a month or $24 a month, with the choice of a seven-day free trial. 

Final Might, Peloton debuted a splashy rebrand that billed the enterprise as a health firm for all, and put its digital app on the heart of its advertising marketing campaign. The rebrand introduced a brand new, tiered app technique that included the limitless free-membership choice and two different paid ranges that every one had various ranges of content material.

The rebrand got here as CEO Barry McCarthy appeared to transform Peloton from one targeted on its {hardware} to a enterprise that was equally as invested in its app. As gross sales steadily declined on the firm, he was working to seize new prospects who might have been intrigued by the model however weren’t keen to shell out hundreds for its gear. 

McCarthy, a former Netflix and Spotify government, had lengthy needed a free tier on the corporate’s app. He had guess that free customers would fall in love with Peloton’s content material after which spring for a paid membership, which comes with a far wider number of lessons, after they tried the app and determined they needed extra. 

The guess seems to have been a bust.

McCarthy told investors in November that the relaunch had been “less successful at engaging and retaining free users and converting them to paying memberships” than the corporate had anticipated.

Quickly after, the limitless free tier was not accessible. 

Throughout a Morgan Stanley convention in March, finance chief Liz Coddington mentioned the corporate “quickly” discovered that the free tier was “cannibalizing” efforts to transform free-trial members to paid subscribers, which led the corporate to shift to a free-trial mannequin. 

“It’s important to know that our app is still a work in progress. We still have a lot of opportunities to improve it,” mentioned Coddington. “What we found is that we need to figure out ways to better engage them during the trial period, that they convert to paid and then also keep them engaged over time, so that they will retain at a higher rate. … When we do that, we believe that our marketing efficiency will improve, both because we’ll have better retention and better conversion rates.” 

Whereas app subscribers declined throughout Peloton’s fiscal second quarter ended Dec. 31, Coddington mentioned the corporate nonetheless “believe[s]” in its app technique and it stays “an important part of the business.” 

Shares of Peloton fell greater than 6% Monday and had been down greater than 45% this yr, as of Friday’s shut. The corporate’s market cap has shrunk to about $1.2 billion, a fraction of the $47 billion it was price on the top of Peloton’s success through the Covid-19 pandemic.