Is this me? Am I the fanboy? Yes, Buffett famously does not take on turnaround businesses (other than the original textmile mill).
Those three are actually talented. Way harder to copy that.
So if I’m a popular Peloton instructor, can’t I just charge people $20/mo instead of $40/mo and tell them to pick a Spotify playlist and let’s go? Get a few hundred subscribers and you’re making six figures.
Who else could it possibly be?
I figure that posting “Buffet” is almost as good as @spidercrab.
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The best way to look at this is probably not margin on subs, but doing an NPV of the customer base to account for churn and marketing costs to acquire customers. Then you can layer on the more fixed costs of the business, like talent costs, to get to a valuation.
I think you are right that there are levers to pull on the hardware side, but I think you are probably overstating the ability to generate cash flow from subs.
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Inflation seems like it is more supply chain related than printing press. For example, if you have a target card, they let you see every purchase. The price of some cuts of pork hasn’t gone up at all but bacon has skyrocketed. If it is just printing press you shouldnt see such a huge disparity.
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I guess this how now evolved into a discussion of how a firm is just a nexus of contracts, and what’s stopping the talented consultant from leaving Accenture or a lawyer leaving Skadden Arps and taking the clients with them? There’s an infrastructure that the firm provides, both tangible and intangible, that far surpasses what an individual employee could provide on their own. And there’s the fact that oftentimes, you don’t just need a single lawyer with a single area of expertise - you have a one-stop firm that handles all of your legal issues with multiple attorneys, each of whom has their own area of expertise.
Maybe I’m fully drunk on the Kool-Aid (I know, it’s Flavor-Aid), but the whole point of a personal trainer is that they provide the encouragement/knowledge/motivation to get you to exercise when you could totally do that stuff on your own. Peloton does that by providing a variety of engaging instructors across multiple disciplines. For example, my preferred yoga person is different from my preferred strength person is different from my preferred bike people (who vary depending on the type of ride I want to do) who vary from my preferred running people (who vary depending on the type of run). I can’t re-create that experience by aggregating a bunch of individuals all operating on their own. I don’t want to have to:
- identify which particular trainers to follow and subscribe to
- decide what spotify playlist I want to listen to that day
- deal with whatever sub-par streaming quality that the individual trainer will be capable of.
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Yes, could be. I am thinking of crash scenarios, not long term stagnation. I personally would be surprised if the US stock market doesn’t whipsaw with huge volatility this decade.
I don’t see an available total market fund on my
options which is why I went with the 30/30/30. The target retirement funds available are American Funds which are charging an expense ratio of 0.39 which is ludicrous. The vanguards I’m holding .05.
That’s fine then
Well I just held subs steady, they’re obviously going to try to grow them - but I do think it’s a limited market. Like how many people are shelling out $2,500 up front to then pay $40/mo for something? Gotta be limited to like the top 10-20% of income levels, I would think.
But yeah I mean you would expect subs to trail off after sales, like the average duration of subscription is probably 1-3 years, before people stop using the bike or stop paying for the subscription. So to maintain you have to sell 2.5 million new bikes every X years, whatever that value is. And that’s into a capped market, most likely.
I think it’s going to crash so I have a lot of dry powder, but I wanted to cover my ass and be invested in foreign stocks somewhat in case we just trade sideways. I figured in that scenario, emerging markets do best, so I went with SPEM.
The rest I wanted to have invested in a good value stock that was a stable foreign company: Korea Telecom. I really love the KT position, they consistently return 1/3 to 1/2 of their profits each year in a dividend. I got in at $11.24, the dividend is going to be 0.57, so even if they just maintain steadily, I get a very low-risk 5% per year. So I don’t even care if it crashes (although it’s got a tremendous margin of safety), I will happily just re-invest the dividends and keep holding it.
Also, you don’t need the hardware to use the app. After having used it for a year, I would definitely subscribe at $12.99/month even without a Peloton-branded bike or tread.
You can try it for free!
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See, now that uncaps the market because you don’t have to be wealthy to pay $12.99 a month. Anyone who owns home gym equipment can consider it. You could even use it with a regular gym membership as an individual.
In fact, isn’t that a model of scaling that they should consider? Like they could exclusively license it to a gym chain, like say Planet Fitness, and charge them like $8/mo per bike or whatever that has the Peloton App on it. Then Planet Fitness can market that you can get Peloton classes there.
I’m not sure if I’m proud or ashamed that I’ve made it this far without knowing anything more about Peloton than they make exercise bikes and had some sort of cringey commercial that I’ve never seen.
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That’s a terrible deal for Peloton. You just went from 40$/person to 8$/dozens of potential customers
Right, thats why you sort of have to layer on the marketing costs to acquire the new customers so the steady subs @ x margin probably going to overstate sub revenue given the rest of what you are saying.
Plus once you take the price of the bikes down, you sell into markets less willing to pay those sub fees and you sort of devalue the brand cache.
Stock might be a buy here, idk, but definitely a challenging business in a number of ways.
Peloton is apparently already charging $13/mo for the app by itself. But they only have 2.5 million subscribers and if they mostly limit themselves to Peloton owners they are pretty capped.
But yeah you’re right the way I suggested it is terrible for them. They’d need to charge a few bucks per member instead, or offer it as a monthly sub to gym members and offer a discount.
But 74 million Americans have gym memberships, so if they figure out a way to tap into that it’s huge. Even getting 10% of that quadruples their subscribers.
Right the marketing cost is part of what’s killing them. Especially because they are marketing to such a small subset of the population. Like their potential customers are: high income, care about fitness, have space for an exercise bike at home.
For starters, high incomes are clustered in cities where homes have fewer square feet. Like there are a lot of challenges trying to sell a $2,500 exercise bike.
Everyone who has them seems to love them, but it’s not like you buy one, love it, and buy a second one. Once you have one you’re good for a long time.
And the brand cache probably doesn’t matter as much as they hoped it would. Like, if I buy a Mercedes for brand cache, everyone sees me drive it. If I buy a Rolex for brand cache, I get to wear it.
It’s not like people put a Peloton in their living room and leave it out when people come over to visit. So it comes down to like is it actually a better bike from a utility standpoint?
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I just wondered whether a sensor could be created that clips onto a stationary bike and sends speed date to an app, so that one could use any stationary bike to take virtual rides with an app’s exercise program?