A thread on Peloton’s $PTON competitive advantages.

This is an inside peak of my first newsletter coming very soon!

My newsletter focuses on moats (competitive advantages). Link in bio.

Here’s what I’ve found so far
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Moat https://abs.twimg.com/emoji/v2/... draggable="false" alt="1️⃣" title="Tastenkappe Ziffer 1" aria-label="Emoji: Tastenkappe Ziffer 1"> High Switching Costs

Equipment (bike/tread) costs $1.9k up to $4.3k a significant sunk cost

99.3% monthly customer retention, 90% after 12 months (traditional gyms: 60%)

High retention translates into high subscription revenue

Gross profit from selling equipment is greater than the cost to acquire customers (CAC). Incredible!

Then, lifetime value per customer is ~$3,500

Summary: they immediately earn back CAC cost with equipment sale and then expect to earn $3.5k over several years

Moat https://abs.twimg.com/emoji/v2/... draggable="false" alt="2️⃣" title="Tastenkappe Ziffer 2" aria-label="Emoji: Tastenkappe Ziffer 2"> Social Network Effect

To think a Peloton membership is grossly overpriced mistakenly undervalues the community aspect

Peloton’s platform recreates the benefits of working out in a group by encouraging peer-to-peer interactions, but at the convenience of your home

Peloton will dominate because they benefit from social network effects

When people consider their connected, at-home fitness options and understand the power of group workouts, there is a forceful gravitation pull towards the Peloton community.

Increased engagement per user is a strong signal that Peloton benefits from network effects

Monthly workouts per user increased from 7.2 to 21.8 at the end of 2020

22x/month sounds like an addiction. Competitors will need to break strong habits.

Moat https://abs.twimg.com/emoji/v2/... draggable="false" alt="3️⃣" title="Tastenkappe Ziffer 3" aria-label="Emoji: Tastenkappe Ziffer 3"> Content & Data Asset

Although the social network effect contributed to increase # of workouts, the main driver was their creative and expansive content library.

Peloton is now a one-stop shop for health and wellness either cardio, strength, and meditation classes

Music is a main ingredient in Peloton’s secret sauce.

Tempo of the music plays a role in the cadence of the workout.

Instructors weave lyrics into encouraging messages or stories.

It is what makes their content exceptional!

Peloton’s first music partnership was with Beyoncé, who signed a multi-year deal.

They also created exclusive Elvis remixes for their platform.

Peloton has an enormous amount of data that connects fitness, music, and personal data to drive decisions.

Peloton’s tools provide feedback on which music performs better, which music drives higher engagement, what music you’re listening to when you set personal records

Leveraging their data and improving the experience will attract more consumers, which adds more data, repeathttps://abs.twimg.com/emoji/v2/... draggable="false" alt="🔄" title="Pfeile abwärts und aufwärts in offenem Kreis gegen den Uhrzeigersinn" aria-label="Emoji: Pfeile abwärts und aufwärts in offenem Kreis gegen den Uhrzeigersinn">

Moat https://abs.twimg.com/emoji/v2/... draggable="false" alt="4️⃣" title="Tastenkappe Ziffer 4" aria-label="Emoji: Tastenkappe Ziffer 4"> Brand

Peloton’s brand is a culmination of everything it does.

Their NPS is 94!

Brand loyalty improves pricing power.

Also, to improve brand: they are investing in apparel, vertical integration, celebrity partnerships (Beyoncé), and more.