The Rise and Fall of Peloton | Maximum Effort | 2

Summary

Business Wars: The Rise and Fall of Peloton | Maximum Effort | Episode 2
Original Air Date: October 15, 2025
Host: David Brown (Wondery)

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Episode Overview

This episode of Business Wars delves into Peloton’s meteoric rise during the COVID-19 pandemic, its missteps and challenges as demand shifted post-pandemic, a dangerous product recall, waves of layoffs and restructuring, and attempts by new leadership to revive the company’s fortunes. The main theme is how explosive but temporary market growth can mislead leaders into making unsustainable decisions, and how Peloton struggled (and continues to struggle) to find stable ground as habits, competition, and economic realities shift.

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Key Discussion Points & Insights

1. Pandemic Surge and Logistical Chaos

• Peloton's demand skyrockets:
  During the early months of COVID-19, with gyms closed, sales of Peloton bikes and treadmills soared by over 170% in just six months (00:01).
• Logistics become a nightmare:
  The company faces massive challenges delivering bikes ("final mile" costs spiraling to $500 per delivery) and backlogs due to factory slowdowns in Taiwan and global shipping chaos.
  • John Foley (CEO): “People want the bikes and they want bikes now. And if they can’t get them from us, they’ll get them from our competitors…This is our moment. We handle this right. Mark my words, Peloton will hit $1,000 per share.” (03:27)

2. Temporary Growth vs. Permanent Change

• Host’s insight:
  David Brown warns that companies sometimes confuse “surfing a wave” with permanent success:
  • “Smart companies separate structural growth from situational spikes…the wave always crashes.” (07:14)
• Peloton’s bet:
  Foley believes gyms are “dead forever” and doubles down on ramping up manufacturing.

3. The Tragedy and Fallout of the Tread+

• Fatal accident:
  A child’s death exposes a fatal design flaw in the Peloton Tread+ treadmill, leading to public backlash, viral videos of dangers, and mounting reports of injuries (11:53–13:45).
• Botched response:
  Peloton initially resists a recall, blaming “improper use.” This is met with anger for shifting blame onto parents.
  • Industry Expert: “A lot of injuries happen with treadmills, but not like this, being sucked underneath the treadmill.” (12:58)
  • Injuries: 70 reports, including 29 children—with severe injuries.
• Major recall:
  $165 million in losses projected. The recall clarifies the critical need for startups to prioritize safety early.

4. Post-Pandemic Realities and Diminishing Growth

• Gyms rebound:
  Despite predictions, traditional gyms rebound fast as restrictions lift. Peloton’s subscriber targets slip. The stock price plunges (e.g., stock drops 34% in one quarter, 16:03).
• Internal morale:
  Employees lose faith as layoffs loom. Foley’s optimism rings hollow.
  • Foley (to employees): “We’re going to win, but we’re going to have to get tighter, leaner, better…But we’re going to have fun. We’re in a fun boat.” (17:29)
  • Narrator’s tone: Employees groan at “fun boat,” signaling deep skepticism and distrust in leadership.

5. Leadership Overhaul: Enter Barry McCarthy

• Investor dissension:
  Major investor Blackwell’s Capital creates a scathing presentation against Foley, blaming him for “gross mismanagement.” (23:00)
  • “Why would you ever admit that you’re not a good manager or go months without talking to your CTO?” — McCarthy’s contact (24:05)
• Barry McCarthy’s arrival (ex-Netflix, ex-Spotify):
  McCarthy sees Peloton as two businesses: hardware (equipment) and content (classes) and believes subscriptions are the key.
  • McCarthy: “For most companies, it’s subscriptions that bring the real return on investment. The margins there are just so much better. And between my time at Netflix and Spotify, I understand media subscription companies.” (25:40)
• Immediate changes:
  • 2,800 layoffs (20% of staff)
  • Halts Ohio factory, closes Precor’s factories
  • Shifts to contract manufacturing, reduces costs
• New strategies:
  • One Peloton rental program ($100/month for bike + content)
  • Increases subscription prices ($39 → $44)
  • Launches new products (AI-powered Guide, Rowing Machine)

6. Financial Struggles Continue

• Revenue drops:
  Despite efforts, Peloton loses $2.8 billion in fiscal 2022. Further restructuring and layoffs follow (500 more employees, Foley fully ousted as chair, 29:00–30:40).
• McCarthy’s warning:
  “The company has six months to drastically turn things around. If it doesn’t, then…Peloton is [not] viable as a standalone company.” (31:10)
• Brand crisis:
  Peloton shifts from darling to desperate turnaround case.

7. The Tread+ Returns

• Safety fixes & relaunch:
  Spring 2023: After two years, Tread+ is reintroduced at $6,000. Management worried about reopening old wounds, but customer loyalty proves strong – there’s a wait list for the treadmill (35:34–36:50).
• Orders for the Tread+ become a rare bright spot in Q2 2024.

8. Experimentation and Partnerships

• App changes:
  Free app tier scrapped; aim to drive more paid sign-ups.
• Partnerships:
  • Lululemon: Content for Lululemon’s fitness app
  • Hyatt: Peloton equipment in 800 hotels
• Layoffs and leadership change:
  Yet, still no profit. Another 500 layoffs. McCarthy departs as CEO (38:00).

9. Peter Stern Takes Over – The Next Chapter

• New CEO:
  October 2024: Peter Stern (ex-Ford, Apple Fitness+) is brought in, with experience in digital and subscription services.
• Rumors of acquisition:
  Private equity interest swirls, but Stern denies:
  • Stern (at Bloomberg Tech Summit, June 2025):
    "I mean, I was not hired to sell this company. I was hired to bring this company back to growth, to reinvigorate it. And it is happening. So we are a standalone company for years to come." (41:17)
• First profitable quarter since 2020:
  August 2025: Surprising analysts, Peloton reports a profit, driven by equipment sales and deep cost cuts (41:28).

10. Lasting Lessons and Future Outlook

• Peloton remains a niche leader:
  Gym memberships persist; connected fitness is not the entire future but Peloton commands loyalty among its core base.
• Host’s final note:
  Peloton may not have revolutionized fitness the way it hoped, but remains the category leader with “devoted fans who love Peloton’s equipment and classes.” (41:28)

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Notable Quotes & Memorable Moments

• John Foley’s pandemic gamble:
  “This is our moment. We handle this right. Mark my words, Peloton will hit $1,000 per share.” (03:27)
• David Brown’s warning:
  “Smart companies separate structural growth from situational spikes … the wave always crashes.” (07:14)
• Industry Analyst on Tread+ injuries:
  “In those 70 are 29 reports of children having injuries that range from second and third degree abrasions to broken bones, some multiple fractures, lacerations, and brain injury.” (13:31)
• Employee skepticism at Foley’s optimism:
  “But we’re going to have fun. We’re in a fun boat.” (17:29) – Host describing eye-rolling employee reactions
• Investor’s critique of Foley (via McCarthy):
  “Why would you ever admit that you’re not a good manager or go months without talking to your CTO?” (24:05)
• McCarthy on business model:
  “Equipment sales are a one time bump. Subscriptions, they’re an annuity. Netflix doesn’t care if you buy a new TV. They care if you stay subscribed. Peloton’s real gold mine wasn’t the bike, it was the classes.” (28:14)
• McCarthy’s blunt warning:
  “The company has six months to drastically turn things around. If it doesn’t, then he’s not sure Peloton is viable as a standalone company.” (31:10)
• Peter Stern (“not here to sell”):
  “I mean, I was not hired to sell this company. I was hired to bring this company back to growth, to reinvigorate it. And it is happening. So we are a standalone company for years to come.” (41:17)

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Timestamps for Important Segments

| Timestamp | Segment | |-------------|-----------------------------------------------------| | 00:01-06:03 | Pandemic sales surge, delivery chaos, Foley’s ambitions | | 06:03-09:00 | Peloton’s original vision and rapid growth context | | 09:00-12:58 | Supply chain struggles & frustration | | 11:53-13:45 | The fatal Tread+ accident, PR crisis, recall | | 13:45-15:00 | Rebuilding after recall, US factory acquisition | | 16:00-17:29 | End of pandemic, gym resurgence, layoffs, morale | | 23:00-26:23 | Foley ousted, McCarthy’s arrival and initial moves | | 28:14-32:00 | New pricing, rental program, experiments, continued losses| | 34:54-38:00 | Tread+ relaunch, partnerships, still struggling | | 38:00-41:28 | Peter Stern hired, acquisition rumors, first profit | | 41:17 | Stern rejects sell-off rumors, vows to restore growth | | 41:28-43:43 | Analyst commentary, episode wrap-up, legacy |

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Conclusion

This episode paints a vivid, candid portrait of how quickly fortunes can turn in fast-growing industries, the hazards of mistaking temporary windfalls for long-term shifts, and the critical importance (and difficulty) of adjusting strategy as customer behavior and markets normalize. Peloton, though battered and now a more humble player, survives thanks to drastic pivots, cost-trimming, persistent customer loyalty—and perhaps, some luck. The story ends with a question mark: Can Peter Stern’s innovation-focused strategy ensure lasting growth, or is acquisition just over the horizon?

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Recommended reading: “Peloton’s Bumpy Ride” by Victoria Song, The Verge

Episode written by Austin Rackless; produced by Wondery.

Transcript

[Narrator (David Brown)]

Wonder. It's summer 2020 in New York City. A Peloton employee types a new set of numbers into a spreadsheet, then sighs frustrated. He's been tasked with trying to improve Peloton's so called final mile of delivery. In other words, getting Peloton's equipment from their distribution hubs to the customer's house. This is always the most logistically complicated and expensive part of shipping products. There's no way to make it efficient since each individual piece of equipment has to go to a different home. But it's even worse during a worldwide pandemic when there's a shortage of drivers. Although the pandemic has wrought tragedy, it's been a boon for Peloton. As gyms around the world closed, customers flocked to Peloton to buy their Internet connected stationary bikes and treadmills. Peloton had unwittingly developed the perfect product for a quarantining public. A platform that allows people to remain isolated but still have a communal workout experience. And the numbers speak volumes. Peloton sales increased by over 170% in the first six months of the pandemic. But that increase in sales has been a double edged sword. There's been so much demand. Peloton has been struggling to fulfill orders, frustrating customers. CEO John Foley and other executives are desperate to get their equipment into buyers hands. Foley has tasked this employee with improving final mile delivery times. But the only solutions the employee has come up with involve spending twice as much as usual. And he's not sure how Foley's going to react. A calendar reminder pops up on his monitor. The employee clicks the link. Foley is already logged on. Hey, how you doing? You know, hanging in there. I hear you. Well, should we jump right in? How's it going, improving final mile delivery time? Well, I. I've been crunching the numbers and the only way I think we can really end the log jam would cost something like $500 per bike delivery. That's fine. The employee's mouth drops, but he quickly recovers. To be clear, I mean, $500 just for the final mile. That's not counting the cost of shipping the bikes in from overseas. Okay, I understand. So you're okay with spending that much money? Because we had set a budget of $250 per bike. Yeah, I know, but people want the bikes and they want bikes now. And if they can't get them from us, they'll get them from our competitors. Okay, but I just want to point out that even if we improve our final mile delivery times. We'll still have a backlog of orders since production at our factory in Taiwan has slowed down. I'm working on a solution for that problem, but for the moment, it's out of our control. The final Mile problem, that's in our control. We just have to spend more money. It's just a lot more money. Foley looks directly into his camera, so it feels like he's looking directly at the employee. This is our moment. We handled this right. Mark my words, peloton will hit $1,000 per share. The employee nods. This is a common refrain of Foley's and the stock price has been going up. It's ultimately Foley's call, not his. But the employee can't shake the tiny shimmer of doubt creeping into his brain. Is spending this much money on Final Mile delivery a good business decision? This message is brought to you by Apple Card. Each Apple product, like the iPhone, is thoughtfully designed by skilled designers. The Titanium Apple Card is no different.

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[Narrator (David Brown)]

From Wondery. I'm David Brown, and this is business wars. In 2012, John Foley and four other co founders launched Peloton, reinventing the industry's understanding of connected fitness. Their stationary bike allowed users to participate in live streamed fitness classes, combining the camaraderie of a spin class with the convenience of an at home workout. Foley and his team had grand ambitions for Peloton. They thought they were going to completely upend the fitness industry. Gyms would be passe the way home video game consoles pushed out arcades. For the first eight years, Peloton cultivated a niche but loyal customer base. But they were still a relatively small player in the home fitness industry and they were far from putting gyms out of business. But in 2020, with the spread of COVID 19, Peloton was the right company at the right time. Gyms were closed and demand for at home fitness equipment spiked. Peloton's share price soared. I want to pause for just a moment here. Let's say you're running Peloton. How would you judge your success so far? It's tempting to believe a surge in demand means you've reinvented the world. But sometimes you're just surfing a wave. You know what happens with waves, right? They always crash. Smart companies separate structural growth from situational spikes. Peloton. This was their dream. Peloton bet gems were dead forever. There's a lesson here. Temporary market distortions don't always equal permanent revolutions. Peloton CEO John Foley saw the soaring share price as the beginning of the fitness revolution he had always predicted. The capitalizing on Peloton's situational success to create sustained success was more challenging than Foley expected. And Peloton was in for a bumpy ride. This is episode two, Maximum Effort, as the COVID pandemic drags on through the second half of 2020 and into 2021. John Foley and the team at Peloton are laser focused on one issue. Getting equipment into the hands of customers. The Pandemic has created a huge demand for their product. By the end of 2020, their revenue is on pace to double from the previous year, bringing in $1.1 billion. There's only one problem. They don't have enough bikes to meet the demand. The company's manufacturing facility is in Taiwan, and lockdowns there mean their factory isn't working at full capacity. Plus, there are backlogs at the ports. The pace of getting equipment off boats and into Peloton's US Warehouses, painfully slow. As a result, customers are on waiting lists. Some have to wait over six months to get the equipment they ordered. It's a bitter pill for customers to swallow, especially after they've shelled out over $2,000 for a bike or $4,000 for a treadmill. Soon, customers become vocal with their frustration. A Facebook group dedicated to complaining about issues with peloton deliveries boasts 10,000 members, and angry customers comment on the company's social media pages. Having been in the connected fitness business since 2012, Peloton came into the pandemic with a market edge. But in the years since Peloton launched, a number of competitors have moved into the market. Several offer cheaper options. Fortunately for Peloton, almost every competitor is also facing supply chain issues, thanks to the pandemic. But if one of its competitors figures out how to get their equipment to customers faster and cheaper, Peloton could be in big trouble. So Foley is determined to do whatever it takes to solve Peloton's supply issues. One of the biggest holdups is getting the equipment from Taiwan to the United States. So Peloton executives start looking into how they can manufacture at least some of their equipment inside the United states. In late 2020, Peloton buys Precor, a US based fitness equipment manufacturing company, for 420 million dol. It's a big investment, but Precor owns factories in North Carolina and Washington State, which Peloton executives hope will help cut down on the wait times to receive equipment. Through the acquisition, Peloton increases its manufacturing capabilities sixfold by the start of 2021. They also start shipping bikes from their Taiwan factory by airplane rather than by boat to avoid the ports. All this helps get bikes to customers faster. But just as Peloton is investing massive amounts of its resources into boosting manufacturing capabilities, tragedy strikes. In February 2021, a six year old child gets trapped under the rear roller of the Peloton Tread plus and dies from a brain injury. The death becomes public in March and the company puts out a statement, Peloton.

[Peloton Executive/CEO John Foley]

CEO John Foley sending an email to members saying in part, I can't tell you how much this news and horrible reality has hit me personally and our entire team at Peloton.

[Narrator (David Brown)]

The company warns users that the Tread Pluses are designed for users aged 16 and over. They remind parents to keep younger children and pets away from the machines, but reports of at least 39 other people suffering injuries, including other children, come out. One user uploads a video to TikTok of a large exercise ball being sucked under the heavy treadmill and bursting while her toddler walks just a few feet away. It's picked up by the media one month later in April 2021. The U.S. consumer Protection Bureau tells people with small children and pets to stop using their Peloton Tread plus immediately. They cite several design decisions that that increase the chance of injury, including that there's no guard on the back of the treadmill, which allows for small children or pets to get sucked under more easily.

[Industry Analyst/Expert]

A lot of injuries happen with treadmills, but not like this, being sucked underneath the treadmill.

[Narrator (David Brown)]

Peloton initially pushes back against the warning, reiterating that the treadmills are safe if they are used properly. There's no reason, they say, to stop using the Tread Plus. But there's quick backlash to Peloton's statements, accusing the company of blaming parents for a design flaw in their treadmill. And over the next two and a half weeks, more injuries are reported, bringing the total number of people hurt to over 70. And some of the reported injuries are quite serious.

[Industry Analyst/Expert]

In those 70 are 29 reports of children having injuries that range from second and third degree abrasions to broken bones, some multiple fractures, lacerations, and brain injury.

[Narrator (David Brown)]

So in early May, Peloton issues a recall of the Tread plus and ceases selling it. Approximately 125,000 of the products are subject to the recall, and Peloton is issuing a full refund for those who return the treadmill within 18 months. You know, product recalls aren't just about refunds, they're about trust, too. Once customers think your product might hurt them or their kids, no amount of marketing spin will fix that. This is why smart startups get safety right on day one. Sure, it's slower and costlier up front, but infinitely cheaper than trying to repair a brand after tragedy. Just ask Toyota, Boeing, or Peloton. The recall is a blow to Peloton's bottom line. The company estimates that they'll lose roughly $165 million over the next quarter between issuing refunds, loss of future sales, and subscription cancellations. But even with this setback and all the bad press, Foley still believes that Peloton's future is bright and he is still determined to build more US Based manufacturing plants. He sees it as the key to the company's success. Three weeks after the recall is announced, Peloton makes another announcement. They're investing $400 million to build a factory in Ohio. It's slated to open in 2023 and will have a footprint of over 1 million square feet, making it one of the largest fitness manufacturing facilities in the entire world. In the Press release. Foley promises that this investment will help ensure that Peloton continues to grow for years to come. But just three months later, in August of 2021, Peloton is once again showing signs of trouble. As vaccines have rolled out and Covid restrictions are lifting, more gyms are able to reopen. Foley had predicted that the pandemic would change how people work out and that traditional gyms would become obsolete. But by the end of 2021, gym memberships at several chains are close to or exceeding pre Covid levels. And Peloton's fourth quarter earnings report reflects this shift. Although their revenue is up, the company falls short of its target for paid subscribers. And the company lowers its forecast for the number of subscribers going forward into Q1. That's even after they announced that they're cutting the cost of their entry level bike by 4, $400. The stock market reacts quickly and it's not good. All right, we're watching shares of Peloton sell off after hours. We've got the latest on their earnings report and it has to do with the guidance and much more. Right. And the grim news continues. Three months later, in November 2021, Peloton posts another disappointing quarter and the stock price plunges by 34%. That's right, a couple of down points in the report. In New York City, a Peloton employee is watching the news coverage of Peloton's latest earnings report and the subsequent drop in its stock price. In a few minutes, an all hands zoom meeting is about to start and CEO John Foley is going to address employees in the wake of the latest round of bad news. Foley has a reputation for staying positive no matter what, but this employee doesn't see how that's going to be possible.

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[Narrator (David Brown)]

The meeting begins. Foley appears solemn in his box on the upper right of the employee's screen. Well, I'm sure you've all seen the news and I'm not going to lie. Our boat of a company is in some stormy waters and we have a tough course to navigate. We're facing what I like to think of as twin storms. The end of the pandemic and the reopening of gyms on one side and continued difficulties with getting our equipment in from Taiwan on the other. The employee sees some of her co workers nodding along, but the employee crosses her arms. All through the pandemic, Foley was adamant that the spike in sales Peloton experienced during the lockdown wasn't a blip. Instead of it signified a new era in how Americans worked out. But now he seems to be singing a different tune. Foley continues, I want to be clear. I still believe in our boat. We're going to win, but we're going to have to get tighter, leaner, better. The employee groans. She's worked in enough corporations to know that tighter and leaner are code for laying people off. It's not entirely unexpected. Peloton rapidly hired people during the pandemic. There were so many people that at times there wasn't enough work for the employee to do. But Foley and the other executives in the C suite are the ones who overhired, and now it's the employees who will have to pay the price. It seems like more proof that Peloton's leadership misread the company's long term prospects. In his Zoom corner, Foley smiles. But we're going to have fun. We're in a fun boat. The employee is glad her camera is off so no one can see how hard she's rolling her eyes. And as she watches Foley grinning and beaming, the employee comes to a realization she no longer trusts Foley's judgment. It seems to her that he's made one mistake after another over the past two years. In her view, Peloton needs a new CEO, and there are some powerful shareholders who agree with her.

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[Peloton Executive/CEO John Foley]

Peloton making some major moves. Co founder John foley out as CEO. And Barry McCarthy, former Netflix and Spotify CFO.

[Narrator (David Brown)]

Stepping in, Foley is made chair of the board. And he gives a statement that one of the reasons he agreed to the change is McCarthy's history of partnering with founders at both Netflix and Spotify. But McCarthy has his own ideas. He immediately announces major changes, undoing much of what Foley did the previous two years. McCarthy lays off approximately 2,800 people, 20% of the corporate staff. He halts the development of the Ohio Factory, saving roughly $60 million. He also closes down several Peloton storefronts. And when these changes don't deliver enough cost savings, he shuts down the two US factories Peloton acquired when they bought Precor in 2020. He even closes the Taiwan factory. Peloton will be outsourcing all manufacturing to third parties from here on out. You know, founders love to build shiny new factories, but investors, they love recurring revenue streams. Here's the difference. Equipment sales are a one time bump. Subscriptions, they're an annuity. Netflix doesn't care if you buy a new tv. They care if you stay subscribed. Peloton's real gold mine wasn't the bike, it was the classes. If you ever find yourself in a similar situation, don't forget to ask yourself, am I in the hardware business or am I in the habit business? But cost cutting can only go so far. Peloton also needs to bring in more money. McCarthy decides to that peloton needs to experiment. He views the company as having two levers. He can pull the price of equipment and the price of the subscription for their digital classes. He especially wants more money coming in from subscriptions. He starts changing prices on the equipment and the digital content, looking to see which combination of lowering and raising costs brings in customers and raises revenue. In the post pandemic world, inflation is on the rise and a wave of layoffs in the tech industry has people worried that a recession may be coming. So Peloton cuts the costs of its bikes and treadmill. The cheapest bike is now under $1,500, but that's still a large expenditure for most Americans. With consumer confidence shaky, it's hard to convince new customers to spend spend that kind of money on a stationary bike. So in September, Peloton launches a bike rental program called One Peloton. For roughly $100 a month, customers can now rent a Peloton bike and have access to all the subscriber content. It's an attempt to lower the sticker shock that may be holding back potential customers from trying peloton. And McCarthy is counting on Peloton's historically low cancellation rate. He's betting that most of these new customers will stick around and continue to shell out $100 per month. He also counts on Peloton's customer loyalty to withstand a price increase for the subscription service. For the first time in Peloton history, instead of $39 per month, it now costs $44 and he starts rolling out new equipment. There's the Peloton Guide, an AI powered personal trainer. It fits on the TV and analyzes a user's form and effort. It's relatively cheap, selling for less than $300. Soon after, they roll out a connected rowing machine for over $3,000. McCarthy is trying to reach new customers from all directions. But none of McCarthy's experiment. Pricing is a little science and a little theater. You drop the sticker price, you'll get more window shoppers. Raise the subscription price and you test loyalty. Add a rental option and you change the psychology entirely. The trick is knowing what customers value most the hardware, the content, or the flexibility. If you misread that, you're not just leaving money on the table. You just might be setting the table for your competitors by June 2022. The company has lost $2.8 billion in that fiscal year. And even though McCarthy has only been at the helm for four months, over half of these losses came while he was in charge. McCarthy argues that these losses are less than they might have been. But the board isn't happy. So in September 2022, Peloton goes through yet another major restructuring. 500 more people are laid off and John Foley is out. He's no longer chair of the board. In the wake of the shakeup, McCarthy agrees to do an interview with a journalist from the Wall Street Journal. He is shockingly straightforward with the reporter. He says the company has six months to drastically turn things around. If it doesn't, then he's not sure Peloton is viable as a standalone company. The statement is a bombshell. Employees, customers and analysts are stunned. Just two years ago, Peloton was bringing in a profit credited with creating a brand new category of at home fitness. And now it's very survival is at stake.

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Spring 2023 in New York City Peloton CEO Barry McCarthy sits at the head of a conference table at company headquarters. It's eight months after he told the Wall Street Journal that Peloton had six months to turn things around. But Peloton is still limping along. It's still not profitable, but it hasn't been acquired yet. Still, there's a bright spot that McCarthy hopes will help finally turn peloton around. McCarthy takes one last gulp of coffee and calls the meeting to order. All right, let's get started. We have some exciting news. He turns to a woman sitting to his right. Do you want to do the honors?

[Advertiser/Host]

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[Peloton Executive/CEO John Foley]

We just got word that the Consumer Protection Bureau has approved our safety fixes to the Tread plus and have authorized us to begin begin selling them again.

[Narrator (David Brown)]

McCarthy grins. It's been nearly two years since the Tread plus was recalled, and I know many people have worked hard to reach this point. And now we can finally bring the tread plus back to market. McCarthy notices an executive sitting across from him, fidgeting. Tom, you look concerned. It's just that I'm wondering if it makes sense to bring the Tread plus back. Doing so will bring the injuries and that death of the child back into the news cycle. I'm not sure that's what we need right now. Another executive nods. Yeah, and with everything that's happened, we really think people are going to want the Tread Plus. I understand your concern, but to me, the Tread plus represents the reason I was so adamant about coming to work for Peloton. Tom raises his eyebrows skeptically.

[Advertiser/Host]

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[Narrator (David Brown)]

Obviously the accident that occurred was absolutely awful. But despite that death, tons of people refused to give back their Tread Pluses when it was recalled. There's some nodding around the table. See, to me, that's what epitomizes the special product we make. Peloton inspires a brand loyalty I've never encountered in all my years in business. That's not something you can buy. And now we've worked with the government and addressed all of their safety concerns. It's time to put the Tread plus back on the market. The executives around the table start to nod. The truth is that Peloton needs to do something to get revenue up. McCarthy tried increasing subscription revenue, and it didn't help as much as he hoped. So maybe now it is time to go back to pushing equipment as the main driver of revenue. McCarthy's pulling every lever he can. He just hopes that one of them works. Peloton opens up orders for the Tread plus in December 2023. The new version is retailing for $6,000, making it one of the highest priced treadmills on the market. Analysts are skeptical that this is a savvy move on Peloton's part. They're not convinced that consumers will stomach such a high price for a treadmill that has a reputation for being unsafe. But McCarthy's instincts are proven correct. Customers are eager for the Tread plus, and soon. There are so many orders that there's a wait list for the machines. In fact, when Peloton announces its second quarter earnings in February 2024, TREAD Sales is one of the few bright spots. Overall, the company isn't growing their subscriber base as fast as they want to, and while their revenue beat expectations, they had higher losses than expected. McCarthy warns investors that the company is still months away from showing a profit. The company does everything it can to boost revenue. They remove the free option from the app, attempting to force members to subscribe to the paid tier they partner with athleisure brand Lululemon to provide content for Lululemon's exercise app. They also make a deal with Hyatt to provide bikes and rowing machines to 800 Hyatt hotels. But the next quarter, Peloton's earnings are still disappointing. Despite all these efforts, Peloton hasn't turned a profitable quarter since 2020, and the path forward is unclear. The company announces that it's laying off an additional 500 people, and Barry McCarthy steps down as CEO. Board members Karen Boone and Chris Bruzo take over as interim co CEOs. The Peloton board takes six months to search for its new permanent CEO. In October 2024, Peloton announces that Peter Stern will be taking over at the start of 2025. Stern is an executive from Ford, leading the automaker's digital development team, including the company's subscription service, BlueCruise. He also co founded Apple Fitness plus, giving him experience in the health and wellness sector. The press release touts Stern's success in leading subscription services and his ability to drive growth. He outlines a plan to focus on innovation as a way to bring in subscribers, including making AI a core part of the Peloton experience. He wants AI to help customers pick the right classes for their fitness level and provide them with specific targets tailored just for them during their workouts. However, a number of private equity companies are rumored to be circling Peloton, looking to take it over, and many analysts predict that Stern's real role is to ready Peloton for acquisition. When a company falters, the rumor mill always jumps to one word acquisition. But selling isn't always the clean exit. It sounds like buyers want bargains, not fixer uppers, and distressed sales usually fetch distressed prices. For leaders, a better move is tightening costs, rebuilding trust and proving viability, even if it's only to negotiate from a position of strength a little later. See, in business, desperation sells cheap. Stability almost always commands a better premium. At the Bloomberg Tech Summit in San Francisco in June 2025, Stern sets the record straight.

[Industry Analyst/Expert]

I mean, I was not hired to sell this company. I was hired to bring this company back to growth, to reinvigorate it. And it is happening. So we are a standalone company for years to come.

[Narrator (David Brown)]

And in August 2025, Peloton reports a profit for the first time since 2020. Surprising analysts, Peloton sold more equipment than expected, and years of cost savings started paying off. Stern promises to keep working to pare costs down further, announcing another round of layoffs, vowing to cut 6% of the workforce. It's hard to know if the profit is a result of specific changes Stern made versus the long tail changes implemented by former CEO Barry McCarthy. But after a tumultuous few years, Peloton seems to be cruising once again. They haven't completely upended the way Americans exercise. Gym memberships endure, proving that many Americans still enjoy exercise exercising outside of their home. But Peloton does remain the category leader in connected fitness, and they continue to inspire devoted fans who love Peloton's equipment and classes. And maybe that's a tall enough hill to climb from. Wondering this is Episode two of the Rise and Fall of Peloton for Business Wars. A quick note about recreations you've been hearing in most cases, we can't know exactly what was said. Those scenes are dramatizations, but they are based on historical research. And if you'd like to read more, we recommend Peloton's Bumpy Ride by Victoria Song Published in the Verge I'm your host, David Brown. Austin Rackless wrote this story. Sound design by Josh Morales. Kyle Randall is our lead sound designer. Voice acting by Chloe Elmore. Fact checking by Will Tablet Our producer is Tristan Donovan of Yellowhead. Our managing producer is Desi Blalock. Our senior producer is Emily Frost. Karen Lowe is our producer emeritus. Our executive producers are Jenny Lauer Beckman and Marshall Louie for wondering in the.

[Podcast Host Lindsey Graham]

1880S, the lawless streets of Tombstone, Arizona were home to the most legendary gunfight in history. Hi, I'm Lindsey Graham, the host of the podcast American Historytellers. We take you to the events, times and people that shaped America and Americans, our values, our struggles and our dreams. In our latest series, we follow the notorious Earp brothers as they take on a band of gun slinging hooligans intent on disrupting law and order. But tensions boiled over on October 26, 1881 when the Earps confronted the Clanton and McClurry gangs near the O.K. corral. In a hail of gunfire, three cowboys were killed, setting off a cycle of violence and retribution transforming the Earps into both heroes and outlaws. Follow American Historytellers on the Wondery app or wherever you get your podcasts. You can binge all episodes of American Historytellers Shootout at the OK Corral early and ad free right now on Wondry plus.