Apple's rumored buy of Peloton ignores giant factors weighing against it

AppleInsider

Investment firm Deepwater Asset Management is guessing that Apple will buy Peloton in the short term to boost subscription revenue -- but the prediction ignores a few key factors why Apple probably isn't interested.

A Peloton exercise bike

No more than Apple buying Disney, the idea that Apple will buy fitness firm Peloton will not go away. Typically the idea is predicated on just how Apple has enough money to buy it, or sometimes that it will be forced to if Amazon or Nike bid for Peloton in order to compete in fitness.

As spotted by Investing.com, the new prediction from Deepwater Asset Management is chiefly also to do with finance, but specifically in what the acquisition could bring Apple.

"Apple will acquire Peloton," says Deepwater's list of 2024 predictions. "Apple will look to bolster their workout segment in 2024 by adding fitness equipment to compliment the Watch and fitness tracking software."

"Peloton has a loyal subscriber base of about 3 million users that will add about $1.7B to Apple's subscription revenue," it continues, while entirely ignoring how Peloton is being sued over the deaths of children. "Additionally this fits well into Apple's continued investment in health and wellness."

The reason this prediction is getting more attention than most is that Deepwater Asset Management issues predictions every year, and says that its 2023 ones were remarkably accurate. They're definitely not remarkably clear, however, with the firm itself claiming a success rate for 2023 of "8.5 out of 10," with it having made 8 predictions and saying it was right about 7 of them.

It's also oddly hard to track back through what the firm says is seven years of these predictions, since some are branded Deepwater predictions, while others are "Loup's technology predictions," referring to the work of Loup Ventures. That firm's analyst Gene Munster has been working with Deepwater Asset Management since 2017, however.

Whether it's Deepwater's own work or a collaboration with Loup Ventures, in 2022, the company lists 7 predictions. While it does not clearly list a success rate, the descriptions suggest it was wrong for at least 4 of them.

For 2021, the firm appears to say it was completely right for 4 of its 9 predictions, and in some way half right for a further two.

The value of Peloton rose over the coronavirus pandemic, only to fall back again, while blaming Apple's iOS 14 App Tracking Transparency for its earning almost $1 billion less than expected in 2021. Although figures vary and are only estimates, it's likely that it would cost Apple at least $9 billion to acquire Peloton, and likely more.

While Apple regularly buys companies, $9 billion would be three times more than Apple has ever spent on any single acquisition. In 2014, it paid $3 billion to acquire Beats and ahead of the deal, pundits including Gene Munster scorned the rumors.

"We are struggling to see the rationale behind this move," wrote Munster when he was with Piper Jaffray. Calling it a "bad idea," he explained that "Beats would of course bring a world class brand in music to Apple, but Apple already has a world class brand and has never acquired a brand for a brand's sake."


Rumor Score: Unlikely

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InspiredCode

Big acquisitions are very rare from Apple. This is the time of year analysts make wild guesses in the name of New Year’s resolutions. With Beats, Apple needed to get Apple Music up quickly to compete. Another Beats style acquisition is not coming.

charlesn

At the right purchase price, I could see this making a lot of sense for Apple. Peloton, for all of its current troubles, remains the biggest brand in terms of a fitness-focused subscription business, which fits nicely with Apple's focus on both health and subscriptions. In fact, just by buying the company, Apple's reputation for high quality and its hordes of cash for further investment would immediately reinvigorate the Peloton brand. But if they're going to do it, I'd say sooner than later is best, because the continued financial and hardware troubles at Peloton--which probably go hand-in-hand--can only serve to damage the brand. 

radarthekat

Apple doesn't need Peloton for software; Apple is capable of creating fitness-related software and anything it creates would be fully and tightly integrated with the Apple ecosystem.  

Apple is also not in a need of hardware design talent.  Apple could certainly design any exercise equipment they want to add to its fitness-related endeavors and have it manufactured by a third-party, bringing its scale and manufacturing engineering prowess to the effort in order to minimize costs and maximize quality and durability.  

Apple does not need Peloton's 3 million loyal customers.  Apple has 1 billion + loyal customers who would extend trust of the Apple brand to any product the company decides to create.  

And finally, Apple does not need the damage to its reputation of taking on a product that is involved in injury-related legal issues.  Not worth the potential hit to its reputation.  Not worth putting its huge cash assets in front of those with claims against Peloton.  

There's really nothing here to advocate for such an acquisition.  

gadgetcanadav2

Apple's biggest priority is to push subscriptions like the Apple Fitness+ subscription. They want all the fitness equipment manufacturers to build their equipment so they integrate into Apple Fitness+. If they buy one manufacturer like Peloton, the other fitness machine manufacturers may ditch Apple Fitness+ integration as to not support their competition. On the other hand, I guess the same argument can be made with Apple Carplay and if Apple will make its own car and competing with the other car manufacturers.

charlesn

radarthekat said:

Apple doesn't need Peloton for software; Apple is capable of creating fitness-related software and anything it creates would be fully and tightly integrated with the Apple ecosystem.  

Apple is also not in a need of hardware design talent.  Apple could certainly design any exercise equipment they want to add to its fitness-related endeavors and have it manufactured by a third-party, bringing its scale and manufacturing engineering prowess to the effort in order to minimize costs and maximize quality and durability.  

Apple does not need Peloton's 3 million loyal customers.  Apple has 1 billion + loyal customers who would extend trust of the Apple brand to any product the company decides to create.  

And finally, Apple does not need the damage to its reputation of taking on a product that is involved in injury-related legal issues.  Not worth the potential hit to its reputation.  Not worth putting its huge cash assets in front of those with claims against Peloton.  

There's really nothing here to advocate for such an acquisition.  

All the same arguments could have been made (and were) against Apple's acquisition of Beats. That didn't work out so bad, did it? It's funny that you say Apple "is capable of creating fitness-related software, etc." Not only are they "capable," but they've already done it: it's called Apple Fitness+, and the fact that you seem unaware of it already existing isn't surprising--it literally has gotten zero buzz. "Peloton by Apple" would immediately bring huge attention to Apple's fitness subscription business and, exactly as you say, would expose it to Apple's billion+ loyal customers. The potential ongoing revenue stream would be phenomonal, especially with Peloton at a $45/mo price point for its all access pass that works with Peloton equipment. Apple could probably slash that price based on volume, roll it into an added cost version of Apple One and sell a whole lot more Apple One subscriptions. I certainly wouldn't bet on this actually happening, but it's an intriguing possibility in a space where Apple has tremendous interest. 

danox

Apple has a busy 2024 ahead of itself with the Apple Vision Pro release, there is no room for a Peloton bailout at any price.

9secondkox2

Peloton makes insanely great products and has a robust and compelling services bundle. It's the best of the best in treadmills and stationary cycles.

Would love it if Apple bought Peloton and added this "hardware" to their software and integrated the services. 

If you don't know what I am talking about you have either never owned a modern Peloton unit or you have never been to a Peloton store to try it out. 

No factors are weighing against it. It would be a fantastic move. 

If Apple thought beats was a good buy, this is at least as good. 

entropys

lmasanti said:

My two cents… worthless as usual.

1— This is a ‘fund management.’ It is probably that they are looking to left out their —failed— investment in Peloton so trying to rise the share price with this kind of ‘announcements.’
We must have a sharp eye in who leaks a news.

2— This kind of business… ‘buy a company for its subscriptors’ is not in Apple's DNA.
If Apple had followed this way in the past… it would have bought Netflix, or any other company… while it chose to… build from scratch.

I reckon you are on the money. But then, apple bought beats for $3b, while I would have thought Apple could have just built up its nascient headset and music subscription business itself. I reckon Tim Apple was just after The Coolness.

badmonk

No way this is going to happen because Peloton guves nothing of significant value to Apple.

makemineamac

As a huge Peloton and Apple fan, I would love this, though, like most of you say, it 's extremely unlikely.

As someone mentioned above, the Peloton hardware is fantastic, and the content keeps me coming back day after day and week after week.

radarthekat

charlesn said:

radarthekat said:

Apple doesn't need Peloton for software; Apple is capable of creating fitness-related software and anything it creates would be fully and tightly integrated with the Apple ecosystem.  

Apple is also not in a need of hardware design talent.  Apple could certainly design any exercise equipment they want to add to its fitness-related endeavors and have it manufactured by a third-party, bringing its scale and manufacturing engineering prowess to the effort in order to minimize costs and maximize quality and durability.  

Apple does not need Peloton's 3 million loyal customers.  Apple has 1 billion + loyal customers who would extend trust of the Apple brand to any product the company decides to create.  

And finally, Apple does not need the damage to its reputation of taking on a product that is involved in injury-related legal issues.  Not worth the potential hit to its reputation.  Not worth putting its huge cash assets in front of those with claims against Peloton.  

There's really nothing here to advocate for such an acquisition.  

All the same arguments could have been made (and were) against Apple's acquisition of Beats. That didn't work out so bad, did it? It's funny that you say Apple "is capable of creating fitness-related software, etc." Not only are they "capable," but they've already done it: it's called Apple Fitness+, and the fact that you seem unaware of it already existing isn't surprising--it literally has gotten zero buzz. "Peloton by Apple" would immediately bring huge attention to Apple's fitness subscription business and, exactly as you say, would expose it to Apple's billion+ loyal customers. The potential ongoing revenue stream would be phenomonal, especially with Peloton at a $45/mo price point for its all access pass that works with Peloton equipment. Apple could probably slash that price based on volume, roll it into an added cost version of Apple One and sell a whole lot more Apple One subscriptions. I certainly wouldn't bet on this actually happening, but it's an intriguing possibility in a space where Apple has tremendous interest. 

Seems I didn't spell it out well enough.  Apple is perfectly capable of creating fitness-equipment controlling and integration software.  In other words, Apple would have little trouble integrating and controlling an Apple designed piece of fitness equipment.  It's no barrier that would require Apple to buy an existing fitness equipment company.  

red oak

Pelonton is a money-losing, dumpster fire.  Three steps away from going bankrupt.   

Do you really think Apple is going to get into treadmills, bikes and rowing equipment?    Nope.  And it already has its own Fitness+ service.   Trying to integrate what Peloton does in this space would be a complete mess  

danox

red oak said:

Pelonton is a money-losing, dumpster fire.  Three steps away from going bankrupt.   

Do you really think Apple is going to get into treadmills, bikes and rowing equipment?    Nope.  And it already has its own Fitness+ service.   Trying to integrate what Peloton does in this space would be a complete mess  

If Apple can pick up the remnants of Peloton for 2 billion dollars, for any patents? I will admit their designs hardware/software are well done just not worth 7-10 billion dollars.

charlesn

radarthekat said:

charlesn said:

radarthekat said:

Apple doesn't need Peloton for software; Apple is capable of creating fitness-related software and anything it creates would be fully and tightly integrated with the Apple ecosystem.  

Apple is also not in a need of hardware design talent.  Apple could certainly design any exercise equipment they want to add to its fitness-related endeavors and have it manufactured by a third-party, bringing its scale and manufacturing engineering prowess to the effort in order to minimize costs and maximize quality and durability.  

Apple does not need Peloton's 3 million loyal customers.  Apple has 1 billion + loyal customers who would extend trust of the Apple brand to any product the company decides to create.  

And finally, Apple does not need the damage to its reputation of taking on a product that is involved in injury-related legal issues.  Not worth the potential hit to its reputation.  Not worth putting its huge cash assets in front of those with claims against Peloton.  

There's really nothing here to advocate for such an acquisition.  

All the same arguments could have been made (and were) against Apple's acquisition of Beats. That didn't work out so bad, did it? It's funny that you say Apple "is capable of creating fitness-related software, etc." Not only are they "capable," but they've already done it: it's called Apple Fitness+, and the fact that you seem unaware of it already existing isn't surprising--it literally has gotten zero buzz. "Peloton by Apple" would immediately bring huge attention to Apple's fitness subscription business and, exactly as you say, would expose it to Apple's billion+ loyal customers. The potential ongoing revenue stream would be phenomonal, especially with Peloton at a $45/mo price point for its all access pass that works with Peloton equipment. Apple could probably slash that price based on volume, roll it into an added cost version of Apple One and sell a whole lot more Apple One subscriptions. I certainly wouldn't bet on this actually happening, but it's an intriguing possibility in a space where Apple has tremendous interest. 

Seems I didn't spell it out well enough.  Apple is perfectly capable of creating fitness-equipment controlling and integration software.  In other words, Apple would have little trouble integrating and controlling an Apple designed piece of fitness equipment.  It's no barrier that would require Apple to buy an existing fitness equipment company.  

Oh, you spelled it out just fine, but you continue to ignore the lessons of the Beats acquisition. Apple had its own music service, music player and EarPods at the time it acquired Beats. So why pay billions for Beats, in 2014 dollars, no less? Why buy what they already had when they could have invested all that cash into their own existing music hardware, software and services? You're saying the Peloton deal wouldn't make sense because Apple is "capable" of creating what Peloton offers. Well, in the Beats acquisition, Apple wasn't just "capable" of creating what Beats offered, they already had it. So by your logic, that deal really made NO sense at all. But what Apple didn't have was the Beats brand and the value that brought to the table. Same for Peloton. When it comes to integration of fitness content and fitness equipment, there is literally just Peloton as the known brand and no one else. And if you can't understand this, I can't help you any further. 

danox

charlesn said:

radarthekat said:

charlesn said:

radarthekat said:

Apple doesn't need Peloton for software; Apple is capable of creating fitness-related software and anything it creates would be fully and tightly integrated with the Apple ecosystem.  

Apple is also not in a need of hardware design talent.  Apple could certainly design any exercise equipment they want to add to its fitness-related endeavors and have it manufactured by a third-party, bringing its scale and manufacturing engineering prowess to the effort in order to minimize costs and maximize quality and durability.  

Apple does not need Peloton's 3 million loyal customers.  Apple has 1 billion + loyal customers who would extend trust of the Apple brand to any product the company decides to create.  

And finally, Apple does not need the damage to its reputation of taking on a product that is involved in injury-related legal issues.  Not worth the potential hit to its reputation.  Not worth putting its huge cash assets in front of those with claims against Peloton.  

There's really nothing here to advocate for such an acquisition.  

All the same arguments could have been made (and were) against Apple's acquisition of Beats. That didn't work out so bad, did it? It's funny that you say Apple "is capable of creating fitness-related software, etc." Not only are they "capable," but they've already done it: it's called Apple Fitness+, and the fact that you seem unaware of it already existing isn't surprising--it literally has gotten zero buzz. "Peloton by Apple" would immediately bring huge attention to Apple's fitness subscription business and, exactly as you say, would expose it to Apple's billion+ loyal customers. The potential ongoing revenue stream would be phenomonal, especially with Peloton at a $45/mo price point for its all access pass that works with Peloton equipment. Apple could probably slash that price based on volume, roll it into an added cost version of Apple One and sell a whole lot more Apple One subscriptions. I certainly wouldn't bet on this actually happening, but it's an intriguing possibility in a space where Apple has tremendous interest. 

Seems I didn't spell it out well enough.  Apple is perfectly capable of creating fitness-equipment controlling and integration software.  In other words, Apple would have little trouble integrating and controlling an Apple designed piece of fitness equipment.  It's no barrier that would require Apple to buy an existing fitness equipment company.  

Oh, you spelled it out just fine, but you continue to ignore the lessons of the Beats acquisition. Apple had its own music service, music player and EarPods at the time it acquired Beats. So why pay billions for Beats, in 2014 dollars, no less? Why buy what they already had when they could have invested all that cash into their own existing music hardware, software and services? You're saying the Peloton deal wouldn't make sense because Apple is "capable" of creating what Peloton offers. Well, in the Beats acquisition, Apple wasn't just "capable" of creating what Beats offered, they already had it. So by your logic, that deal really made NO sense at all. But what Apple didn't have was the Beats brand and the value that brought to the table. Same for Peloton. When it comes to integration of fitness content and fitness equipment, there is literally just Peloton as the known brand and no one else. And if you can't understand this, I can't help you any further. 

The software team that designed the Beats software program was really good at the time their UI was better in many ways to Apples at the time. Peloton is good just not 7-10 billion good.

radarthekat

danox said:

charlesn said:

radarthekat said:

charlesn said:

radarthekat said:

Apple doesn't need Peloton for software; Apple is capable of creating fitness-related software and anything it creates would be fully and tightly integrated with the Apple ecosystem.  

Apple is also not in a need of hardware design talent.  Apple could certainly design any exercise equipment they want to add to its fitness-related endeavors and have it manufactured by a third-party, bringing its scale and manufacturing engineering prowess to the effort in order to minimize costs and maximize quality and durability.  

Apple does not need Peloton's 3 million loyal customers.  Apple has 1 billion + loyal customers who would extend trust of the Apple brand to any product the company decides to create.  

And finally, Apple does not need the damage to its reputation of taking on a product that is involved in injury-related legal issues.  Not worth the potential hit to its reputation.  Not worth putting its huge cash assets in front of those with claims against Peloton.  

There's really nothing here to advocate for such an acquisition.  

All the same arguments could have been made (and were) against Apple's acquisition of Beats. That didn't work out so bad, did it? It's funny that you say Apple "is capable of creating fitness-related software, etc." Not only are they "capable," but they've already done it: it's called Apple Fitness+, and the fact that you seem unaware of it already existing isn't surprising--it literally has gotten zero buzz. "Peloton by Apple" would immediately bring huge attention to Apple's fitness subscription business and, exactly as you say, would expose it to Apple's billion+ loyal customers. The potential ongoing revenue stream would be phenomonal, especially with Peloton at a $45/mo price point for its all access pass that works with Peloton equipment. Apple could probably slash that price based on volume, roll it into an added cost version of Apple One and sell a whole lot more Apple One subscriptions. I certainly wouldn't bet on this actually happening, but it's an intriguing possibility in a space where Apple has tremendous interest. 

Seems I didn't spell it out well enough.  Apple is perfectly capable of creating fitness-equipment controlling and integration software.  In other words, Apple would have little trouble integrating and controlling an Apple designed piece of fitness equipment.  It's no barrier that would require Apple to buy an existing fitness equipment company.  

Oh, you spelled it out just fine, but you continue to ignore the lessons of the Beats acquisition. Apple had its own music service, music player and EarPods at the time it acquired Beats. So why pay billions for Beats, in 2014 dollars, no less? Why buy what they already had when they could have invested all that cash into their own existing music hardware, software and services? You're saying the Peloton deal wouldn't make sense because Apple is "capable" of creating what Peloton offers. Well, in the Beats acquisition, Apple wasn't just "capable" of creating what Beats offered, they already had it. So by your logic, that deal really made NO sense at all. But what Apple didn't have was the Beats brand and the value that brought to the table. Same for Peloton. When it comes to integration of fitness content and fitness equipment, there is literally just Peloton as the known brand and no one else. And if you can't understand this, I can't help you any further. 

The software team that designed the Beats software program was really good at the time their UI was better in many ways to Apples at the time. Peloton is good just not 7-10 billion good.

Thanks for spelling that out to him.  I was in favor of the Beats acquisition and argued at the time that just the Beats hardware in Apple's retail locations would pay for it in a short period.  Maybe Charles is just new here.  Apple also got the Beats talent for a time to help it build Apple Music.  Jimmy Iovine was no small
potatoes in the music industry.  

Beats also didn't suffer from its products being associated with children's injuries or deaths.  

Anyway, in the fullness of time we shall see whether Apple will engage with Peloton.  And yes, at firesale prices maybe Peloton gets scooped up by someone.  Certainly that didn't happen to GoPro, back when there was speculation about it being an acquisition candidate.