CNBC Disruptor 50

Peloton launches an app that's available to anyone—regardless whether they buy a bike or treadmill

Key Points
  • Peloton, known for its spin bikes, is unveiling a new app called Peloton Digital.
  • Peloton's new platform includes a suite of live and recorded video and audio workouts that include walking, yoga, strength training and cycling.
Peloton is rolling out a digital app with live and on-demand workout classes.
Source: Peloton

Peloton doesn't want consumers to just think of bikes and treadmills when they hear its name.

It wants them to think walking, yoga, strength training and basically every other fitness word they can come up with.

The company known for its spin bikes equipped with screens to stream virtual workout classes unveiled on Wednesday a new app that will be available to anyone, regardless of whether they purchase a Peloton bike or treadmill. Dubbed Peloton Digital, it includes a suite of live and recorded video and audio workouts.

At $19.49 per month, the digital subscription is Peloton's most affordable option. Its bikes sell for $1,995, treadmills for $4,000 and monthly class subscriptions for $39.

This is a massive shift for Peloton, but one that could help the already-booming business avoid the fate of countless other rivals that have struggled to grow outside of urban areas.

"This isn't somehow a strategic pivot into some other area to try to get growth growing," said Peloton President William Lynch. "Our bike business is exploding in a good way. ... This is just about our path to get as many people engaging with Peloton content and classes as possible, and we're going to do that not only in the U.S., but globally.

Peloton has raised nearly $445 million, has been valued at $1.4 billion and is growing. Yet even the most successful boutique fitness brands can stall once they've saturated the market.

Competitor SoulCycle pulled its initial public offering registration last month, three years after filing it, citing "market conditions." This fueled skepticism on whether fitness brands can scale beyond cities where people tend to be more willing to pay $35 per class.

Peloton's flat monthly subscription of $39 costs just a little more than what one boutique fitness class typically costs, but that was if someone could afford a $1,995 bike or a $4,000 treadmill. Members will be able to access the digital platform as part of the monthly fee.

Loyalty is a challenge across the fitness world because people want variety. Peloton surveys its members annually and found this was true among them.

Lynch said Peloton has invested "tens of millions" of dollars into building the digital product over the past two years and plans to invest "hundreds of millions more" in coming years.

Currently, members complete 36 percent of their workouts with Peloton, Lynch said. He anticipates the digital offering will boost that number to more than 60 percent.

Peloton will also battle countless other digital workout programs, including Aaptiv and Kayla Itsines, and dozens of others for attention in a crowded app store. Lynch brushes this off, saying people will flock to Peloton Digital because no one else competes at its level.

Most classes will include video to help guide people through the moves, except for outdoor running classes that will be audio tracks. Lynch said history shows that video works.

Aaptiv CEO Ethan Agarwal disagrees. He's built his fitness company on audio-only workouts with the idea that people aren't staring at a screen while they work out.

Lynch said it's too early to know whether Peloton's app will become a bigger revenue stream than its product business. CEO John Foley told CNBC last month the company is "weirdly profitable" in light of the fact that it sold its first product four years ago.

"We don't think of Peloton Digital competing with our hardware business," Lynch said. "We think of it as another offering to let people choose how they engage with Peloton."

Initially, Peloton Digital will be available to download only for iOS in the U.S. and Canada. It plans to roll it out to Android phones later this year.

Disclosure: CNBC's parent company, Comcast/NBCUniversal, is an investor in Peloton.

Correction: An earlier version of this story incorrectly suggested SoulCycle's business has plateaued.