The Peloton Business Model – How Does Peloton Work & Make Money?

Peloton Interactive makes money primarily by selling fitness equipment and via interactive sports content. The company was founded in 2012 by John Foley (CEO), Graham Stanton, Hisao Kushi, Tom Cortese, and Yony Feng. As of August 2019, it counts over 1.4 million members on its platform with annual revenues of $915 million.

In its S1 filing, the firm calls itself “a technology, fitness, media, design, software, retail, product, apparel, experience, logistics company”. But above all, they are a “an innovation company transforming the lives of people around the world through our ever-evolving fitness platform”.

Let’s dive into the details of what that actually means.

A Short History of Peloton

The concept of Peloton came to Foley in 2011. At this time, we was the acting president of e-commerce at Barnes & Nobles. Next to his time-consuming job and two kids, he found himself having less and less capacity to attend his fitness classes.

During this time, instructor-led fitness classes began to gain popularity. Companies like SoulCycle and Flywheel created a much more intimate experience with its customers. Unfortunately, due to his limited availability, John found himself unable to attend many of these classes and had to revert to his home bike. “A totally unsatisfying experience”, as he described in the How I Built This podcast.

He realized there was a void to be filled. He quickly sketched out his vision of an indoor bike with an attached monitor, which would stream cycling classes. Being a Harvard Business School grad and accomplished exec, Foley tapped into his extensive network and was able to raise a $350,000 seed round along with $50,000 of his own funds.

While Tom Cortese, COO of Peloton, joined prior to the round, the other founding members followed soon after. Interestengly enough, the first four employees did not draw a salary, but received equity instead.

By the end of 2012, Peloton was able to raise a $3.5 million Series A round. Additionally, the company launched a Kickstarter campaign to raise additional funding and increase awareness for the product (and securing an additional $307.000).

Until today, the company was able to raise a whopping $994 million in venture capital funding. An additional $1.2 billion was raised during the company’s recent IPO, valuing it at $8.1 billion.

The Peloton Business Model

As stated in the introduction, the company sees itself operating in a multitude of industries and markets, ranging from technology over media to obviously fitness.

Let’s dive into them in more detail.

Connected Fitness Products

As of October 2019, the company sells two different workout products. The first one is the Peloton Bike, an indoor cycle with a touchscreen monitor. Starting price is $2,245 with the option of monthly payments (at 58$/month). Furthermore, the consumer can choose from different packages that include add-ons such as shoes and headphones.

Next to the bike, the company also sells the Peloton Tread. Similarly, to the bike, the treadmill comes with a touchscreen monitor as well and retails at a starting price of $4,295. Conversely, add-ons can be bought on top.

As illustrated in their S-1, 78% of the company’s revenue comes from these two products. But what is really exciting isn’t necessarily the doubling the doubling revenues (from $183.5 mil. in 2017 to $348.6 in 2018 and $719.2 in 2019), but the profit margins it receives on these products. These come at 43%, which is exceptional for a physical product.

Source: S-1 Prospectus


Next to the sports equipment, the company also sells fitness clothing under its Peloton Apparel brand. This includes clothing such as t-shirts and leggings as well as accessories like gym bags and hats. 


On top of its hardware sales, Peloton customers can subscribe to exclusive sports content streamed directly to their monitors.

Cyclists can either join a live class and compete against other participants or simply follow pick a class from Peloton’s extensive content library. The monitor then shows them how they stack up against the other participants, whether or not they improved to their prior workouts while being directly connected to the instructor.

The monthly subscription price comes at $39, just a little over the price of a boutique fitness class at companies like Flywheel.

Additionally, customers can download the Peloton app and subscribe to various classes such as Yoga or strength training at $19.49 a month.

Interestingly, their profit margins on subscriptions are roughly the same compared to their physical products. Although the company doesn’t offer an exact breakdown of their cost structure, it is believed that aspects like production, R&D, marketing, and their instructors salary are heavily influencing the category’s profitability.

Which leads me to the next chapter..

How Much Do Peloton Instructors Make?

Although Peloton is not officially sharing their salaries, it is believed that the instructors make $500 to $750 per class. With 10 to 15 classes taught in a week, an instructor could rake in up to $585.000 annually (52 weeks/year * 15 classes/week * 750$). 

In order to attract popular instructors in the beginning, the company also handed out stock options.

Peloton’s Ownership Structure

The S-1 filing listed venture capital firm Tiger Global as the biggest shareholder in the company (19.8%). John Foley owned a little over 15 million shares, equaling a 6.2% stake in the company.

Other noticeable shareholders included TCV (6.7%), True Ventures (12%) and Fidelity Investments (6.8%).

How Many Peloton Bikes Have Been Sold To Date?

Again, the company chose not to disclose the exact figure of their sales. But according to their S-1, they claim to have “sold approximately 577,000 Connected Fitness Products, with approximately 564,000 sold in the United States”.

Since the bike can be seen as their flagship product (and has been around much longer than the tread), one can assume that the majority of sales comes from its cycling product.

How Many Users Does Peloton Have?

As of September 2019, Peloton claims to have 1.4 million members using their interactive fitness platform. These members completed a total of 58 million workouts in the fiscal year of 2019.

Furthermore, Peloton claims that its existing members are highly devoted to the product and platform. This is backed by a supposed retention rate of 92%.

Key Takeaways

  • Peloton created a premium product which users absolutely love, leading to high margins and loyal customers
  • Some of its instructors even obtain celebrity-like fame
  • Through the power of their brand, the company can branch out into other verticals such as running or apparel
  • Overall, Peloton was able to create a new market category, namely that of connected fitness products