Peloton Considers a Deal: Where does IP Fit In?
In early February 2022, news broke that Peloton, the stationary bike manufacturer, could potentially be considering a deal with a buyer like Amazon or Nike.[1] Facing an 83% drop in share price from its peak in late 2020, major investors have recently began encouraging Peloton to consider such a deal.[2] The COVID-19 recovery has proved tricky for the exercise machine manufacturer: following a $439 million loss in the second quarter of 2022, Peloton announced its intention to reduce its corporate work force by 20%.[3] Given the change in economic circumstances, investors have been agitating for a change in strategy.[4] The company’s co-founder and C.E.O., John Foley, has since responded that management was “open to exploring any opportunity that could create value for Peloton shareholders.”[5]
Given that there is some interest in a Peloton sale, analysts think that Peloton’s strong base of hardware and software success could make it a valuable acquisition for the right company and at the right price.[6] As demonstrated in other tech-sector M&A deals,[7] Intellectual property will prove a central consideration to finding the right buyer and establishing the right price. Companies with mature and developed IP have proven and tested contributions to make to a buyer, and buyers are better able to understand how the target should be valued. IP issues may also be key to any Peloton deal: while any company can design and manufacture exercise equipment, Peloton’s strategic advantage comes from its large library of streaming on-demand workout classes, as well as live classes that are compatible with their connected fitness devices.
Peloton’s platform has similarly established its dominance in the exercise equipment space, with digital leaderboards, virtual call outs from friends and instructors, and integrated physiological sensors. It is this platform that has allowed Peloton to be able to provide a “multidimension experience” to home fitness enthusiasts.[8] While it is unsettled as to how courts will protect platforms from copyright infringement, there is some indication that graphical user interfaces can be protected based on their unique “look and feel”.[9] Peloton’s video library, content integration with exercise equipment, and graphical user interface are all unique to the Peloton experience and could provide a purchaser with valuable additions to their IP library.
While it is uncertain if or when such a deal will materialize, there are several positive outcomes that could result from such a merger. Amazon could integrate Peloton’s digital offerings into its Prime Video platform, expanding Peloton’s existing strategy of selling on-demand video memberships to subscribers who use non-Peloton brand indoor bikes.[10] There is some talk that Apple could be interested, especially as it continues to grow its Fitness+ subscription service.[11] Industry watchers will continue to keep their eye on Peloton to see what the end result of this speculation will be.
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