Thread by @kintsugiinvest

What makes Peloton special?

They're like WWE, live theatre, church combined.

I started buying positions since June 2020.

But 99% of investors don't get it

It's not about the digital subs or low churn.

None.

Here's 5 reasons why $PTON holds a special place in my portfolio:

1. Connection to instructors like Hollywood stars

2. Proven system for creating crowd pullers like WWE

3. Live theatre in disguise

4. It's all about the music

5. People work out to be entertained

Here's a breakdown of each:

1. Connection to instructors like Hollywood stars

Looking at their FB group...

I was amazed to see the level of connection people had with specific instructors.

You see users going gaga when they bump into instructors in NYC.

This special connection people feel towards an instructor is hard to duplicate.

It's not just the Peloton brand...

It's with the specific instructors.

Just look at Cody Rigsby performing on DWTS...

Read the comments in the youtube video and you get the point:

Kinda like how someone is a fan of Robert Downey Jr...

and whether he's in Avengers or in Sherlock, you still watch him because you just love him.

But this can also be a risk, given how much connection people have with specific instructors.

Which brings me to reason #2...

2. Proven system for creating "crowd pullers"

I'd be worried if they were only relying on just 2-3 star instructors.

But as I dug deeper, I was impressed at their process.

A lot of focus used to be on more OG instructors like Cody, Robin, Ally etc.

But things have changed...

Over the last 1 year, I've seen more instructors hit "stardom" level, and become crowd pullers themselves.

This tells me one thing:

Peloton has a proven system for making "stars" and "celebs".

They know how to engineer a crowd puller.

As I was digging deeper into them last year...

I listened to several podcasts with some of their instructors (Cody, Jess King etc)

That's when I learnt many of their instructors had little fitness background.

They come from a different walk of life i.e. dance.

Peloton looks for instructors with personality and showmanship.

That's what makes them different.

Peloton is not just in the fitness business.

They are in the entertainment business.

Look at the IG profiles of some instructors and you know it's well managed:

Not the best example, but something I can think of to explain this would be:

The wrestling business (WWE) back in the good ole days.

I used to be a fan of some of the classic crowd pullers:

The rock, stone cold, HHH etc.

While I felt an emotional connection to 1-2 specific wrestlers...

The WWE had many others in the Roster that were also crowd pullers.

They had a reliable process to develop stars and create celebrities from nobodies.

And that kept the audience coming back every week.

This has changed a lot in the recent years, and you see WWE struggling.

Thus that's a red flag I would look out for in my thesis.

But as long as their system for creating stars remains intact, it still holds.

This could be a risk.

But for now, it's an advantage they have.

3. They are live theatre in disguise

I recall digging deeper into the business, and learning that a handful of their classes were scripted.

They had a full music and production crew on site.

And the class flow was choreographed by directors beforehand.

Instructors would be told to say certain things at a certain point in the class...

To address a rider that day who lost her mum and say a certain line as the music shifted...

It's an emotional experience.

And people loved it.

Having something scripted and planned out also tells me they have a process laid out.

It's like making a movie.

There is a formula.

Kinda like the hero's journey and story arc.

Once something works, they can keep repeating it.

4. It's all about the music

Peloton does spend quite a fair bit on their music rights and licenses (from their 10K).

And this is what makes them special.

Being a fan of working out for the last 10 years, I know 1 thing to be true:

Good music is crucial.

A good playlist can make you work even harder...

And yet NOT feel tired.

Seeing Peloton offer themed rides (i.e. Britney spears, Beyonce) tells me they understand how to tap into this.

This makes the ride fun and enjoyable.

And if it's fun, the riders keep coming back

5. Users workout to fill their emotional and entertainment needs

The traditional model: you workout and exercise to lose weight.

It's a painful process.

A means to an end.

The Peloton model: you workout because it's fun and entertaining.

The process itself is the reward.

The gratification is instant.

Using the product itself delivers happiness.

People hop onto the bike because they just had a terrible day...

And they need someone to make them laugh and cry.

Read these comments from one of Cody Rigsby's rides:

But it's not all laughs.

People also hop onto the bike because they lost a loved one recently, and need some inspiration from the instructor.

It's an all in one experience of:

- workout
- dance club
- live theatre
- church sermon
- motivational seminar

All combined into one.

That's what makes them special.

When customers are buying your product because they love USING it, they become sticky.

It's not just a means to an end.

That's why Peloton holds such a special place in my heart.

And also my portfolio.

I hope this has been helpful.

I'm open to feedback and comments if any.

Also follow me at @heymaxkoh

I tweet about my journey of how I attained financial freedom before age 30...

By investing in great businesses that excite me.

Recap of what makes $PTON special:

1. Connection to instructors like Hollywood stars

2. Proven system for creating crowd pullers like WWE

3. Live theatre in disguise

4. It's all about the music

5. People work out to be entertained