Peloton CEO John Foley on bikes, revenue and recessions - Axios
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Peloton CEO John Foley on bikes, revenue and recessions

John Foley is a veteran technology executive and entrepreneur, having previously held senior positions at companies like Citysearch, Evite and Barnes & Noble (where he led e-commerce). Now he runs Peloton, a so-called Netflix for bikes that effectively offers professional spin classes in a user's home. If that sounds familiar, it may be because you saw the company's store in your local shopping mall, or one of its recent spate of television commercials.

The New York-based company also reportedly is raising up to $120 million in new VC funding at around a $1.2 billion valuation. Axios spoke with Foley via phone about Peloton, its finances, its competition and its future. The quick read:

  • Peloton is best known for hardware, but it's more a software and media company.
  • The company generated $170 million in revenue last year.
  • Last month it streamed one million rides. Monthly subscriber churn is just 0.3%.
  • Peloton discussed bringing rivals Soul Cycle and Flywheel onto its platform.
  • It pays its instructors 3-4 times the market rate, plus bonuses.

Is Peloton a hardware or software company?

For sure we're a software company. The entire leadership team comes from consumer Internet… We decided to get into hardware because we didn't think there was any existing hardware that was good enough. So we went out and decided to make a bike and make a big tablet for it. But what differentiates us is the software, which includes the streaming and the gamification and the network. We're also a media company on top of that, because we're streaming 12 hours of live TV content each day and have another 4,000 classes on-demand. It's kind of like how Apple was before all the services went to the cloud and the handsets basically become dumb terminals, plus CPUs and smart-chips.

Will you also have to open up your walled garden for third-party content?

We've played with it, and even talked to Soul Cycle and Flywheel, asking if they wanted to have a channel. We were open to the idea, but they were not. A couple of years ago we also leaked out on Reddit how to unlock the device and download Netflix, but there haven't been a lot of people asking for it. Overall, I do assume that content in this area is going to massively heat up in the next year or two, including among all the traditional stationary bike manufacturers who have realized that people don't want to stare at a wall and motivate themselves. That's why we're capitalizing to be very aggressive.

Speaking of capitalization, will you comment on the Bloomberg fundraising report?

I'm not going to discuss that, but we tripled the size of the company last year and plan to do so again this year.

Tripled in terms of what?

We went from 20,000 bikes to 60,000 bikes and $50 million in revenue to around $170 million. We also have 99.7% monthly retention on our subscriptions... We're also doing more and more of our own logistics. We currently have three Peloton/Mercedes Sprinter vans in three cities and rolling out another seven this year. That means people will get bikes delivered by our people, who will set them up, put cleats on their shoes, hook up the WiFi and even answer questions about different instructors. It's UPS meets Apple's Genius Bar. We currently have a 93 net promoter score and, I know it sounds crazy, but I want us to get to 100.

Peloton has lived its entire life in an economic recovery. How do you sell more $2,000 bikes and $39 monthly subscriptions if things turn south?

First we're going to take some sticker shock off the table by launching a three-year financing plan on the bike. We're also going to market how Peloton is an investment that scales inside your household. A couple can both pay for Soul Cycle classes or monthly gym memberships, or they can share a bike and pay $39 per month for unlimited classes. We think it's actually the perfect product for a recession, because it's cheaper in the long-term than the alternative.

Another alternative would be riding outside. Are most of your sales in cold weather states.

That's what I originally thought would happen, but Dallas is actually our best store right now. When Soul Cycle filed its S-1, they came under some criticism because 97% of their revenue was in three markets. For us, only 27% of our bike sales are to New York City and California. It really speaks to how much demand there is across the nation.

If you're a media company, in part, then your instructors are the talent. How do you recruit and compensate them?

We streamed one million rides in the last 30 days. If you're a spin instructor reaching 50 people in a sweaty basement, you want a chance to reach that kind of audience. We also pay three to four times more than market rate, plus a performance bonus where the top ones get a little bit more. We also care a lot about our culture, so retention hasn't been a problem. In five years from now, if other platforms like ours emerge, we'll have to continue to maintain that culture and make it even more attractive. One big way to do that is continue to improve the software, which makes the experience better for both users and instructors.


Trump trade adviser circulated docs linking manufacturing declines to abortion, spousal abuse

Peter Navarro. Photo: Andrew Harnik / AP

Peter Navarro, President Trump's top adviser on trade policy, circulated two diagrams internally claiming without evidence that decreased manufacturing is causing divorce, spousal abuse, increased abortion rates, increased drug use and more, according to the Washington Post, which obtained the documents.

Why it matters: President Trump and Navarro are aligned on trade, both contending that broad agreements like NAFTA are killing U.S. manufacturing. Two White House officials told the Post of concerns that "such unverified information could end up steering White House policy."

Go deeper: The art of the deal-breaker.


White House weighs in on Niger deaths, travel ban ruling

Trump at a Rose Garden press conference Tuesday afternoon. Photo: Carolyn Kaster / AP

President Trump called the families of the four U.S. service members killed in action in Niger to offer condolences, Press Secretary Sanders said Tuesday evening. Trump was questioned about his public silence on the deaths yesterday, and falsely claimed his predecessors had declined to call families of those killed.

The White House also released a statement calling a Hawaii federal judge's block on Trump's revised travel ban a "dangerously flawed" decision. The Justice Department will "vigorously defend" the ban, the White House said.

Meanwhile, Trump sent out two afternoon Twitter attacks — one aimed at the media and the other aimed at Democrats in Congress.


McCain says he'll support bipartisan health care plan

McCain speaks after he received the Liberty Medal from the National Constitution Center in Philadelphia. Photo: Matt Rourke / AP

Sen. John McCain, whose opposition sunk an earlier Republican health care proposal, said Tuesday night that he looks "forward to supporting" the bipartisan plan put forward by Republican Sen. Lamar Alexander and Democratic Sen. Patty Murray. McCain added that he hopes the plan is "a sign of increased bipartisanship moving forward."

President Trump has called it a "good short term solution" and Chuck Schumer has said most Democrats are supportive. House conservatives, meanwhile, are more skeptical.

Go deeper: The details of the plan.


Mueller's team interviewed Sean Spicer Monday

Spicer resigned as Press Secretary over the summer. Photo: Alex Brandon / AP

Former White House Press Secretary Sean Spicer was interviewed Monday by Special Counsel Robert Mueller's team, Politico reports. Spicer fielded questions on the firing of James Comey and Trump's meetings with Russians, including his Oval Office meeting with Russian Foreign Minister Sergei Lavrov, per Politico, in a meeting that lasted "much of the day."

The big picture: Mueller's investigation has reached people who were in the room when Trump made key decisions and statements that are now under scrutiny.

Go deeper: Spicer kept notebooks detailing goings-on at the White House; Mueller wants to speak with six Trump aides


Close Putin ally linked to Russia's fake news factory

Photo: Mikhail Klimentyev / AP

The Russian "troll factory" that spread misinformation during the 2016 U.S. election, the Internet Research Agency (IRA), was funded by a close ally of Vladimir Putin's, according to a CNN report. The oligarch, Yevgeny Prigozhin, is nicknamed "Putin's Chef." His business, Concord Management and Consulting, had a contact drawn up with IRA in 2013 for 20 million rubles ($650,000).

Why it matters: This is further evidence that election meddling efforts reached into Putin's inner circle.


EPA loosens radiation safety standards

Photo: Pablo Martinez Monsivais / AP

The Environmental Protection Agency has labeled levels of radiation 10x greater than those considered acceptable under the Obama administration as not harmful to people's health, according to a Bloomberg report. The EPA sets such regulations in case of nuclear meltdowns or other events that expose the public to radiation.

  • EPA spokesman Michael Abboud said: "EPA has not changed its standards regarding radiation exposure, and no protective guidelines were changed during this administration...The guidance was released on January 11, 2017 -- before the President was inaugurated." Bloomberg said an FAQ on the decision was released last month.
  • Jeff Ruch, executive director of the Public Employees for Environmental Responsibility, told Bloomberg: "This appears to be another case of the Pruitt EPA proclaiming conclusions exactly opposite...of scientific research."

Facebook's head of experimental hardware is leaving

Regina Dugan is leaving Facebook. Photo: Photo by Brad Barket/Getty Images

The head of Facebook's skunkworks division Building 8 will leave the company. Regina Dugan said in a statement given to Recode that there's "is a tidal shift going on in Silicon Valley, and those of us in this industry have greater responsibilities than ever before" and that the "time feels right" to be "thoughtful about new ways to contribute in times of disruption." She said in a different post that she will be in charge of a "new endeavour."

Why it matters: Dugan arrived at Facebook last year to lead a division tasked with projects like building a way to type with your mind. Her departure comes as the company faces enormous pressure over its role in an increasingly unequal and divided society.


Magic Leap confirms $502 million fundraise

Magic Leap CEO Rony Abovitz
Photo by Brian Ach/Getty Images for Wired

Magic Leap, the secretive "mixed reality" startup, announced on Tuesday that it has raised $502 million in new venture capital funding led by Singapore sovereign wealth fund Temasek. This is the same round that Axios discussed last week, based on a Delaware regulatory filing (which authorized up to $1 billion in new shares at an increased valuation). The post-money valuation appears to be around $5 billion.

Bottom line: Investors clearly keep seeing something they like in Magic Leap, but consumers are still waiting for the Florida-based company's first product to debut.

Cap table: In addition to Temasek, other new Magic Leap investors include EDBI (Singapore), Grupo Globo (Brazil) and Janus Henderson Investors. Return backers include Alibaba Group, Fidelity Management and Research Company, Google, J.P. Morgan Investment Management, and T. Rowe Price.

Related: A pair of former Magic Leap engineers today announced that their new startup, which helps streamline the design process of 3D concepts for VR/AR apps, has raised $3.5 million in seed funding.


Federal judge blocks Trump's latest travel ban

An Iraqi family landed in the United States as a federal court blocked a travel ban in March. Photo: Felipe Dana / AP

A federal judge in Hawaii has blocked President Trump's third attempt at implementing a travel ban, which was set to go into effect Wednesday.

What's next: The administration is almost certain to appeal, meaning the revised ban could again reach the U.S. Supreme Court. But for now, the block means the administration cannot deny travelers from six of the eight countries officials said were either unable or unwilling to provide the information the U.S. requested for entry.

  • His quote: Judge Derrick K. Watson in Hawaii, who issued a temporary restraining order against the administration, said the latest version of the ban, "suffers from precisely the same maladies as its predecessor."
  • What's in question: As with the previous versions, the underlying decision relies on whether the ban is based on animosity toward Muslims.
  • What makes this ban different from the previous versions: The latest order was only passed after the U.S. underwent extensive negotiations with other countries for more information that would vet their citizens. The list of countries affected by the ban also now includes North Korea and Venezuela, two countries that are not Muslim-majority. The other countries include Syria, Libya, Iran, Yemen, Chad, and Somalia.
  • What critics are saying: Challengers argue the additions are largely "symbolic," per the Washington Post's Matt Zapotosky, who writes that the new order would only impact" certain government officials from Venezuela, and very few people actually travel to the U.S. from North Korea each year."

Trump's short list for Fed chair

Yellen at a hearing in Washington. Photo: Andrew Harnik / AP

President Trump is expected to name his pick to be chairman of the Federal Reserve before leaving on an Asia trip Nov. 3, Bloomberg reports. Here are the candidates:

  1. Current chair Janet Yellen
  2. Fed board member Jerome Powell
  3. National Economic Council Director Gary Cohn
  4. Former Fed member Kevin Warsh
  5. Stanford University economist John Taylor
Why it matters: "At issue for the next Fed chair, if Yellen isn't renominated, is ensuring the long expansion doesn't give way to a recession," Bloomberg writes.