Peloton Quietly Ends Unlimited Free App Memberships After Failing to Attract Paid Subscribers

Peloton the corporate quietly removed the unlimited free membership tier of its fitness app lower than a yr after its debut since the initiative wasn’t converting users into paid subscribers, the corporate says.

Over the past few weeks, Peloton has eliminated its free option for brand new users, once a key a part of the corporate’s growth strategy. People who signed up for the corporate’s unlimited free membership before it was removed will still have access to it, Peloton said.

New users who want to exercise with the corporate’s app now have access to just two tiers, which cost $12.99 per 30 days or $24 per 30 days, with the choice of a seven-day free trial.

Last May, Peloton carried out a striking rebrand through which it marketed itself as a fitness company for everybody and placed its digital app at the middle of its marketing campaign. The rebranding brought a brand new, tiered app strategy that included a vast free membership option and two other paid tiers, each with different levels of content.

The rebranding got here as CEO Barry McCarthy wanted to transform Peloton from a hardware-focused company to one which was equally invested in its app. As the corporate’s sales continued to decline, he tried to attract latest customers who may be intrigued by the brand but not willing to spend hundreds on its equipment.

McCarthy, former Netflix AND Spotify director, has long wanted to have a free tier in the corporate’s application. His bet was that free users would fall in love with Peloton’s content, after which, after trying the app and deciding they wanted more, they’d upgrade to a paid membership, which incorporates a much wider range of classes.

It looks just like the bet turned out to be a bust.

In November, McCarthy told investors that the relaunch “was less effective at engaging and retaining free users and converting them to paid memberships” than the corporate expected.

Shortly thereafter, the unlimited free tier was not available.

While Morgan Stanley at a March conference, CFO Liz Coddington said the corporate “quickly” learned that the free tier was “cannibalizing” efforts to convert free trial members into paid subscribers, prompting the corporate to switch to a free trial model .

“It’s important to know that our app is still a work in progress. We still have a lot of room to improve it,” Coddington said. “We found that we needed to find ways to better engage them during the trial period to get them to the paid version and then keep them engaged over time to maintain higher levels of engagement. …When we do this, we believe our marketing effectiveness will improve, both through improved retention and higher conversion rates.”

Although the variety of app subscribers declined in Peloton’s fiscal second quarter ended Dec. 31, Coddington said the corporate still “believes[s]” in its app strategy and remains “an important part of the business.”

Peloton shares fell more than 6% on Monday, and as of Friday’s close, they are down more than 45% this year. The company’s market capitalization has shrunk to about $1.2 billion, a fraction of the $47 billion it was worth at the height of Peloton’s success during the Covid-19 pandemic.