Peloton’s offers a “cloud-based live streaming of instructional cycling exercise content on a multi-touch console equipped with social elements.” Owners of the Peloton bike are able to livestream spinning classes, as well as access an on-demand library consisting of previously recorded classes.
Selling a bike for $2,000 and charging monthly subscription fees of $39 to take its home classes, Peloton’s built up a community of 30,000 riders in just two years of operation. 
Once an under-the-radar startup, Peloton has now attracted the attention of well-capitalized competitors due to its meteoric rise and has recently ascended to unicorn status upon closing a $325M Series E funding round from major venture capital firms. Most notably, Flywheel, a boutique PE-backed spinning chain with ~40 locations, recently launched a Peloton copycat called Flywheel Anywhere, begging the question: what should Peloton do to defend its market position and protect its growth trajectory?
Peloton has increased the value to its customers by introducing network effects into the at home fitness ecosystem for both instructors and riders. Peloton’s live sessions are designed to be interactive and fun with high energy, intensity and different beats so as to significantly improve the home exercising experience.
The key technologies enabling network effects to develop on the digital bike platform are Peloton’s data sharing and communication technology. These technologies allow instructors to interact with riders via “shoutouts”, one of the key drivers of Peloton’s indirect networks effects. However, these indirect network effects diminish at scale (recently, Peloton had 10,000 riders on a single live stream class, a guinness world record).  At this large scale, it is difficult for the instructor to interact with each of the live riders looking for a personalized experience with the instructor, destroying Peloton’s core value driver for indirect network effects. Additionally, the on-demand course offerings do not provide any interaction between the rider and instructor, making these network effects relevant only in the live ride scenario.
Peloton’s platform has also seeded direct network effects on the rider side of the platform, but not on the instructor side. During a ride, riders can track their friends’ stats, encourage each other, and even egg each other on. However, Peloton’s dual bike-app product strategy only provides weak network effects today. Looking forward, Peloton must explore how to expand and increase the strength of network effects to all users to increase overall value of the platform.
Peloton does not intend to be a completely open platform. Quality control and owned content are important elements of Peloton’s closed and curated platform today.  It wants to deliver a curated experience by carefully vetting spinning instructors and their workouts before bringing them onboard as shareholders in the company. Going forward, there are clear benefits to keeping the platform closed on the instructor side. A curated experience protects Peloton from the risk of volatile fads and negative cross-side effects, maintaining a quality experience for users in the fiercely competitive boutique fitness ecosystem.
On the riders side instead, the platform could be open for more and more riders to connect through the Peloton interface to further drive network effects. To be an open platform on the rider side, Peloton must lower barriers to purchase. The high price point of $2000 for the bike hardware has likely restricted a widespread adoption of its offering across demographics and geography. One example of Peloton recognizing this is the launch of a hardware financing program of $97 per month for 39 months for the bike. This year c. 30-40% of sales included an installment-based financing option, up from c. 3% three years ago.  Such initiatives will help Peloton scale its user base and get better quality rider data.
 Crunchbase, https://www.crunchbase.com/organization/peloton-interactive.
 “Peloton Secures GUINNESS WORLD RECORDS ™ Title for the Largest Live Cycling Class.” PR Newswire: News Distribution, Targeting and Monitoring, 23 Nov. 2017
 Lacey, Sarah. “Streaming the Future of Fitness.” | Startups.co, 11 Dec. 2016
 Carolyn Tisch Blodgett, SVP of Brand Marketing at Peloton; MIT Martin Trust Center Interview