Venture

Pricey Hardware And Subscription Revenue Drive Millions Into Connected Exercise Equipment Startups

It’s the holiday season, which for you likely means lots of travel, shopping, and, of course, food. Lots and lots of calorically dense food. Barring a lot of self-discipline, most of us will start 2020 a little softer around the edges.

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New year, new you, right? A lot of us will end up hitting the gym, but if you have the space and cash to swing it, there are an increasing number of home fitness options to consider.

Now, to be clear, the idea of buying a treadmill or stationary bike or rowing machine for home use is not new. What is new, however, are the slew of internet-connected fitness equipment offerings with classes and progress tracking on a subscription basis, allowing companies to capture value not just from the sale of physical hardware (a typically low-margin business) and long-term revenue on high-margin services over time.

This business model is compelling to some venture capitalists, who’ve poured millions of dollars into the connected exercise equipment sector. In the chart below, we plot the total venture capital raised by companies in the connected fitness sector.

Peloton is likely the best-known venture on the list. The connected stationary bike and treadmill company helped to create the business model described earlier. In Crunchbase News’s coverage of the company’s S-1 filing prior to its IPO, we showed how an ever-larger proportion of Peloton’s revenue is attributable to subscription revenue. Its stationary bike costs over $2,200, but to access the guided spin classes with energetic instructors, its customers pay an additional $39 per month for the privilege.

Tonal is another. Its nearly $3,000 (plus tax and delivery) wall-mounted resistance training device has a $49 per month membership fee, which, like Peloton, grants Tonal users access to the company’s class catalog. A MIRROR, similarly, costs nearly $1,500 (plus a $250 installation fee) but requires a $39 monthly subscription to use. Otherwise it’s just a wall-mounted mirror.

Clearly, these devices are marketed to and priced for people with a fair amount of disposable income. The devices themselves are not inexpensive. The subscription fees may be nominal, relative to a gym membership and the extra hassle of commuting to a workout, but if people stop paying them, the devices either stop working, or they lose the tech-enabled “magic” that makes the equipment so appealing to a certain segment of the market.

It’s a figurative treadmill involving, in some cases, a literal treadmill. The premise of hooking a fitness fanatic for life is an appealing one for sure, but it can be costly.

Illustration: Dom Guzman

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