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At the end of last year, the bottom fell for Peloton. As life returned to normal after nearly two years of pandemic restrictions, demand for the company’s branded exercise bike faltered, driving down inventory of the brand. Activist investor Blackwells Capital, which has a 5% stake in the company, strongly argued for a sale, offering a range of well-known technology companies as potential buyers. Reports that the company had production stopped and slashed sales targets began to circulate, a dark cloud that was quickly followed by news that its founder, John Foley, was stepping down as CEO and the company was laying off 2,800 employees.

Barry McCarthy, Spotify’s former chief financial officer, who was installed as Foley’s replacement, dismissed takeover talks, making it clear that Peloton plans to go it alone, said BMO Capital Markets analyst Simeon Siegel. Perhaps more importantly, Foley doesn’t want to sell. And although he is no longer CEO, he has assumed the role of executive chairman and continues to effectively control the company. (Foley’s two-class share structure means that while he doesn’t own a majority of the shares, he has a majority of the votes.) “Unless John wants to sell, this company won’t sell,” says Dan Primack. , economics editor at Axios and the author of the Pro Rata newsletter.

That doesn’t mean someone with deep pockets – hello, Amazon or Apple – couldn’t sweep away with an offer too good to refuse. But this hypothetical company would have to pay top dollar. According to Siegel, that’s probably not an attractive prospect, in part because Peloton, with its stunted growth projections, isn’t promising enough to be an attractive acquisition target.

Although many headlines have speculated that Peloton will end, there is one potential salvation from this doom and gloom: the company’s dedicated userbase. Peloton rose to prominence by creating a great customer experience through the breadth and personalization of its fitness classes, a feature that has not gone away. As it stands, its unsubscribe rate remains “extraordinarily low, below 1% of people,” Primack says. This may be partly because customers who can afford to pay thousands of dollars for a bike or treadmill can afford the additional subscription fee of $39 per month; Plus, investing in something that expensive is a good incentive not to throw in the towel, at least for the first two years. But it also speaks to the company’s ability to create engaging content that users can personalize and truly connect with.

After all, before Peloton was a cautionary tale, he was a Silicon Valley darling who found success through ambition and mutability, both in the community he created and its changing brand identity. Launched as an exercise company in 2012, Peloton’s aspirations quickly widened to the point where it began to market itself not as a fitness juggernaut but as a media brand and one way of life. His charismatic Star instructors became social media influencers with millions of followers each, and the brand entered the pop culture lexicon before COVID hit. Growth (and brand awareness) skyrocketed: From September 2019 to the same month a year later, subscriptions to Peloton bikes and treadmills soared from 563,000 to 1.3 million. In response, the company spent a lot of money expanding its manufacturing capacity, betting that the surge in demand would last. As the pandemic progressed, however, that hockey stick trajectory petered out: As of September 2021, Peloton had 2.5 million members, but significantly slowed growth in early 2022, spiraling its stock. (After quadrupling in 2020, Peloton’s share price has dropped nearly 80% in the past 12 months.)

For the company’s most dedicated users, this slowdown has been painful. At least that’s how Alison Smoker, 38, a mother of three in Atlanta feels who bought a Peloton bike in December 2019. Despite its steep price tag (bikes start at $1,495) and the cost of a subscription monthly, the change made financial sense to Smoker, who had already shelled out $25 to $30 per person for SoulCycle and FlyWheel classes.

Smoker has since become a convert to The Peloton; she appreciates being able to work in sessions around her schedule and extensive course library. Like so many users, she has developed parasocial relationships with her favorite instructors, whom she follows on social media, tracking milestones like births, weddings, and more recently, appearances on Dancing with the stars and the launch of clothing lines sponsored by Adidas. “Looks like I’m friends with these people,” she laughs. It is very wanted. Peloton workouts are expertly infused with the unique stories, personalities and energies of the instructors. When Smoker wants to “laugh through something”, she takes a class with Cody Rigsby; when she wants to dance, it’s cardio with Ally Love; if that’s the inspiration she’s looking for, “Robin [Arzon] is my go to every time.

Smoker has become such a Peloton fan that she regularly invites girlfriends to try out the bike, eager to convince them to buy one and join her for live workouts. But with the reopening of gyms and fitness classes, it’s an increasingly tough sell. A sale of the business makes her nervous — “I’m not a big fan of Amazon,” she says — and she doesn’t want the classes’ unique vibe and vibe to change.

Primack says the company didn’t do well in anticipating this shift in supply and demand: it’s a big bet that a pandemic-induced spike in orders was the new normal rather than a temporary feature of an unprecedented virus. “It would be interesting to see what Peloton would look like today if there hadn’t been a pandemic and they had been able to continue growing on a gradual upward trend,” he says.

As demand for Peloton continues to dwindle, a sustainable future depends on the company’s ability to accept that its target audience may not be as large as it once thought, Siegel says. The next logical step then is to focus on major customers like Smoker who would likely pay more for a subscription, especially one with additional features, rather than driving away many more users by lowering prices. Peloton has expanded its offerings in the past – it launched cardio dance class in 2020, rolled out boxing classes at the end of last year, and just introduces a series of game-inspired workouts– and there was talk of a branded rower. For its part, Peloton sees its treadmills as a long-term growth opportunity; it’s not hard to imagine die-hard loyalists buying multiple machines and building an exclusively branded Peloton home gym. While much of the high-end connected fitness market has been saturated, there’s still room to grow, Primack says, but not at the rate it was growing.

A renewed focus on core customers could also mean altering its membership levels. Erika K., a 31-year-old project manager who lives in New Jersey, pays $12.99 for a digital-only subscription, which includes virtually all Peloton content. Her relationship with the brand is much more casual than Smoker’s: She downloaded the app a few months ago after learning that her insurance covered the cost of membership and has been using it three or four times a week. Like Smoker, she appreciates the breadth of content, the ability to fit classes into her schedule, and the quality of the instructors. Unlike Smoker, she doesn’t follow any instructors on social media and isn’t brand loyal. If the app suddenly cost her, she would give it up: in her opinion, there are too many similar free apps to justify spending money on any other.

Offering users like Erika Peloton’s content library, or “crown jewel,” without any expectation that they’ll buy a bike and upgrade to a more expensive subscription isn’t a lucrative strategy, Siegel says. Plus, full-access members who pay significantly more for the same digital content might start to question the momentum, especially as the company continues to beef up its off-bike offerings. Going forward, Siegel says it might be a good idea to offer digital subscribers an ad-supported option or less class variety to differentiate between the two tiers and encourage members to upgrade, though that might mean that Peloton could lose users like Erika and see the total number of users decrease. .

Going that route would require a clear understanding from executives of the limitations of Peloton’s user base, Siegel says. Despite a few indicators, including the closure of a national warehouse and subsequent layoffs, he is skeptical of management’s commitment to a more circumscribed long-term vision, particularly as long as Foley remains in the pilot’s seat.

But if Peloton can reverse its ambitions, rein in its spending, and eventually stabilize its share price, millions of active users like Smoker are still ready to interact with the brand on a regular basis. Primack highlights the many social media communities that have sprung up around instructors or different workouts. “These are really dedicated groups of people, and they’re not small,” he says. Every Saturday, Primack does an hour-long live Peloton race, and every Saturday he is joined by thousands of other users. “It’s not possible that everyone has 10 a.m. ET as the ideal time to run on a treadmill,” he says. “They want to feel that sense of community.” The company has always done a great job of building and maintaining this social, community-based fitness experience that motivates users to keep showing up. There is a possible future in which “the customer experience doesn’t change for people who have had a great experience,” says Siegel.

Smoker really hopes that will be the case. At this point, Peloton is part of her weekly routine; his instructors give him a sense of connection and, during the darkest days of the pandemic, his outdoor workouts have given him a healthy dose of much-needed alone time. To this day, the brand’s ever-motivating classes, combined with their flexibility, remain her biggest draw. Giving it up would be a big loss. “I can do it on my schedule. It motivated me to be healthier than before,” she says.