Mar 28, 2017 ยท 9 minutes

It’s too simple to say Peloton is the next iteration of what Soul Cycle began.

Peloton and Soul Cycle are in some ways as fundamentally orthogonal and Facebook and Snap.

Peloton is about metrics; Soul Cycle is about unlocking your own inner coach so that you don’t need to look at your wrist or a screen.

Peloton is about the comfort of your own home; Soul Cycle is about the power of riding in a pack.

Peloton is about versatility: You can ride as short as ten minutes, as long as an hour, and do HIIT classes, yoga classes, abs and arms classes, with more to be added soon. Soul Cycle is like going to church: There are two time options: 45 minutes or the rare “Soul Survivor” that’s an hour. Want more? Do a double. On the holidays, there are limited “Turkey Burns.” But each class follows a formula. A Soul Survivor is the same class with two more songs added in. You go in, leave your cell in the locker, and enjoy the candlelight and loud music.

Peloton operates out of plenty, and Soul Cycle out of scarcity. A hot Soul Cycle class can sell out in minutes.

Peloton raised $120 million in venture capital— with some $120 million more on the way. Sould Cycle raised no traditional venture capital, netting the founders a combined $180 million in the Equinox sales.

Peloton has a familiar model that locks you into a monthly payment— it’s up to you to get your money’s worth. Soul Cycle boldly pioneered the “No you can’t pay a flat monthly fee” boutique fitness model.

But the pricing philosophy is even more nuanced than that. Peloton sells its gorgeous and sophisticated bikes at cost, hoping they’ll profit off of your $30 or so a month the longer you own their bikes.  Soul Cycle doesn’t GAF about lifetime value, or maybe they do, but the business model does not. The bikes costs… price upon request. And that doesn’t come with streamed instructors.

Compare that to Peloton, which will do zero financing for a year on a $2,000 bike just to get you in the funnel.

Perhaps the biggest difference: Soul Cycle is a post-acquisition, “IPO in a holding pattern” company that’s been around more than a decade, and doesn’t have a history of moving fast when it comes to technology. And its founders have departed.

Peloton, meanwhile, is a surging startup, seeking new funding at a “unicorn valuation.” When that broke a few weeks ago, it was one of the only things I can remember that Dan Primack, Keith Rabois and I agreed on via Twitter: They will get it.

That’s a sign that it’s the biggest no brainer deal in years, or the apocalypse is coming.

There are plenty the two have in common: Both were founded by teams who’d just had young children and wanted more options in efficient, ass-kicking fitness. Both pioneered the use of technology in fitness in different ways. Soul Cycle built one of the first digital registration systems to sign up for classes in advance; Peloton’s bike and streaming service are a feat of technical engineering that took a full two years of development. Both rely on cult-of-personality-style instructors, who go through rigorous training. Both were founded in New York. Both say the secret sauce that elevated them was “content” less than hardware or marketing or any other variable. Unlike a lot of fitness startups, neither was founded by some diva trainer, who overshadowed the brand.

I have been a power user of both, logging some 20 rides a month, at my most inspired. I love both. And yet, both are incomplete on their own.

In the future, Peloton and Soul Cycle need each other, even more than Snap and Facebook do. Facebook — it’s said— has more people working on Snap’s products than Snap does. It is a huge public company that is endlessly trying to copy one of the only high profile companies that wouldn’t sell to it. (The other was Twitter… which doesn’t exactly inspire…)

Soul Cycle doesn’t have that DNA and doesn’t have the heft or know-how to even do that if it wanted to. By the time I interviewed the founders on stage in 2015, they didn’t have a Soul Cycle app and they were well aware of how bad of an experience that was for users. Made worse because its site was built in Flash. So you literally couldn’t book at bike when they became available at noon on Mondays, unless you were sitting at a desktop computer.

They tried outsourcing it, and it ended in disaster, they said. By the time the built in house app arrived, it was great. But it took a long time.

In that same 2015 interview, I spoke with Soul Cycle’s founders about all types of digital stuff they were working on that still hasn’t surfaced and those founders are gone now. They talked about something under the seat that was unobtrusive but could track your metrics for you without taking you out of the experience. And when someone in the audience asked specifically -- two years ago!-- about Peloton Soul Cycle’s co-founder Elizabeth Cutler said this:

We’ve been playing with that, we’ve been actually having such a good time working on content, because we believe in content. That’s the only way the experience can translate. We’ve shot a bunch of classes, figuring out angles and lighting, so we can not be bored staring at a screen. You are right. There is definitely some nuance involved. We are definitely making some progress.

Once we feel like it’s ready to get out there, we will bring it out there. I think when we do do that, we will think about making it agnostic in terms of delivery system could go on phone or TV not on a particular screen. 

I don’t doubt all that. And yet, it hasn’t shipped.

Soul Cycle does many things well. But the company doesn’t break anything, but it also doesn’t move fast. At all.

As a power user, here’s how it breaks down for me. Soul Cycle has my heart, but Peloton has my head.

Soul Cycle is the better experience— hands down. Soul Cycle has better instructors— hands down. The lack of metrics really does allow you to lose yourself and have the same stream of consciousness pattern of creative thinking that you have, say, in the shower. The whole pack thing definitely gets you to push harder than you would in your living room. And when you pay for a Soul Cycle class, you go, because it is so expensive you want to get your $30 worth.

Peloton is far more convenient— I can almost always find at least 30 minutes a day to work out if I don’t have to adhere to a schedule or go anywhere, and it allows me to do so while my kids are asleep without getting a sitter. And it’s just astronomically cheaper. Even with financing the bike, a month of Peloton is about $300 a month. In another six months, that’ll go down to $30. Twenty rides in a month on Soul Cycle is double the first figure: $600.

And that’s before you factor in any other family members, who can also use the bike under their own profiles bundled under that $30 a month.

But Peloton has its own issues. People want to try a bike before they shell out $2,000 for it and building out showrooms is expensive. Soul Cycle’s real estate footprint could help with that. And an investor who was passing on the current Peloton round told Bloomberg this:

One of the two people, who asked not to be identified because the negotiations were private, said he planned to pass on an investment, due to the rich valuation and his belief that in an economic downturn customers would seek cheaper exercise options. 

While Peloton is far cheaper than Soul Cycle, it’s still pricey. The two fighting to carve up the market of avid well-off indoor cyclists hurts both companies.

Soul Cycle was a financial hardship for me, but I sucked it up because I loved it so much. There’s simply no way I can justify it in a world where Peloton exists.

This is the problem: Soul Cycle’s biggest markets by far are New York, San Francisco and LA. Sure, they have operations in far more cities, but those cities are where the real critical mass occurs.

That leaves the rest of the world essentially open for Peloton. And unless you are stupid rich, San Francisco, LA and New York Soul Cycle die hards (like me) are vulnerable. Yes, Soul Cycle is right that what they do is different. But MySpace said that. Twitter said that. If you want to be a growing public company, you need more than rich folks in three cities.

And Soul Cycle knows this. This is why years ago they were working on an “at home” product that they presumably still haven’t cracked.

This would be an epic culture clash if the two combined. And culture clashes are the single biggest thing that dooms acquisitions. I get what every insider of both company will say about just how doomed the idea is.

The biggest problem— for Soul Cycle— with the two companies merging is cannibalization, because the orthogonal natures of the price structure is so distinct. But at some point— and that point is approaching if Peloton is getting into unicorn funding range— Soul Cycle can either help cannibalize themselves (as Netflix did with the move from DVD to streaming) or let Peloton do it for them.

You can imagine a few scenarios where the two exist under the same roof.

I miss Soul Cycle enough I would pay, say, $100 a month instead of $30 in order to have unlimited Peloton and a certain allotment of classes at an actual Soul Cycle in San Francisco, just to have the IRL experience. Say four, which slightly discounts the price-per-class but rewards you for being locked into a subscription and buying a bike.

I would also pay slightly more money per month— maybe $40? $50?— to get Soul Cycle instructors on my Peloton bike. And it would probably encourage me to do more Soul Cycle classes IRL.

I would also pay — say— $5 per class to do live streamed classes on my Peloton taught by Soul Cycle instructors. I’m sure people closer to the two businesses could come up with even more models that offer the flexibility and ubiquity of Peloton but the premium product of Soul Cycle.

But this much is certain: Soul Cycle isn’t going to compete at this point in a meaningful way in the at home market, and it can’t scale fast enough— even if it goes public— to be truly national, let alone global, the way Peloton can. Peloton isn’t quite as good as Soul Cycle. But the latter is easier to catch up on.

Soul Cycle did everything right. It was a pioneer. It simply didn’t anticipate another company figuring out “at home” with almost the same level of quality so quickly. But now that that’s happened, it needs to pay attention.