(Bloomberg) — Peloton Interactive Inc. is making its first major change under new management, testing a combined monthly subscription price for the company’s bike and content that wouldn’t require users to pay for the hardware upfront.
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The approach will be tried at select Peloton retail stores in Florida, Minnesota, Houston and Denver, with about nine locations in total offering the option. The test applies only to the company’s standard bike, which currently costs $1,495.
Chief Executive Officer Barry McCarthy, who took the helm last month in a shake-up, said in an interview published Thursday that the company was considering a number of pricing approaches. The subscription strategy is similar to one used for inkjet printers, where the revenue from refilling the ink cartridges is more important than sales of the printers themselves.
With the new rental plan, that package will include an all-access content subscription, which typically costs $39 per month and offers a range of live and on-demand exercise classes. The monthly combined hardware and content plan will cost $60 to $100 per month, with the prices differing regionally. Users will need to contact a participating store to sign up.
Despite no longer needing to buy the hardware upfront, users will have to pay a $250 delivery fee. The test is essentially a rental program — without a commitment — because users will be able to stop the service and return the bike at any time. Customers will also have the option to buy out the bike and only pay the monthly content fee.
For now, Peloton is limiting who can sign up for the program. The company said that Peloton users who held an all-access subscription over the past year can’t sign up, nor can any member participating in a 30-day or 100-day home bike trial.
The push aligns with McCarthy’s history as a former chief financial officer for Netflix Inc. and Spotify Technology SA, two companies that made their fortunes on subscriptions. The companies also have frequently tested different approaches.
Peloton didn’t say how long this new test would last.
“I would say that my learning at both Netflix and Spotify is that there are many things we tried that we thought would be great successes in the market and that failed, and there were many things that we didn’t think would be impactful and were very impactful,” McCarthy said in the interview. “So at the end of the day, the only way to know is to test and let the market inform you what’s a good idea and what’s a bad idea rather than sit around and debate endlessly while the paint dries.”
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