Member Mailing: Why Peloton Within Apple or Amazon Would Be An Optimal 21st Century Media Business
Key Takeaways
Peloton's objectives to become the "Netflix of Wellness" hit a wall in its first two quarters of fiscal 2022
Peloton has admitted to investors that it fundamentally misread the market and its target customers
Sales growth dropped to 6% YoY in Q2 of fiscal 2022, while its operating expenses jumped 92%
The stock has declined 76% over the past year, suggesting a sale is inevitable
A PARQOR Hypothesis analysis suggests why Peloton optimally would achieve its "Netflix of Wellness" within Amazon
Peloton's future is as uncertain as ever after a brutal few weeks of disappointing earnings, reduced demand, paused production, layoffs, and yesterday's news that CEO John Foley had stepped down and will become executive chairman. He is handing over the reins to former Spotify and Netflix chief financial officer Barry McCarthy.
There have been acquisition rumors, and Bloomberg's Andrea Felsted has reported that the destinations could be Nike [1] or Amazon, and there has been other speculation it could be Apple.
In the latter two cases, Peloton would be plugging into ecosystems that have their own media services, and in the case of Apple its own streaming media for fitness with Fitness+.
if Peloton's goal is to become the "Netflix of Wellness", its goal is to become a 21st century media company. The optimal 21st century media company model is best explained by the PARQOR Hypothesis.
Peloton hits three of five BEADS attributes of the PARQOR Hypothesis:
✅ an Aspirational Brand
❌ Existing user base at scale
❌ Multiple Avenues to monetizing the same IP, and
✅ Daily value proposition (something new for fans to consume daily)
✅ Sales Channels: Online (digital) and offline (physical) commerce (e.g., merchandise)
Peloton is worth diving into with the PARQOR Hypothesis because it has sought to position itself in the overlap of Direct-to-Consumer and media, and weighted its growth model towards media. However, it has done so by assuming a hardware company can successfully run a parallel path to building out the Netflix content production and distribution model. It has also misunderstood the core attributes of a successful media business in the 21st Century.
An acquisition could help it to solve for its missing BEADS attributes. Given that both Amazon and Apple would immediately solve for Existing user base at scale, the question is how each would help Peloton solve for Multiple Avenues to monetizing the same IP.
Apple and Amazon both offer different answers, and Amazon offers the better one.
[Author's Note: The rest of this essay will be exclusive to members, only.]
You can read two recent mailings on the PARQOR Hypothesis here: