Today, we’ll explore the history of the gym equipment giant Peloton Interactive, Inc. and how they successfully transformed their IoT-based hardware and software into a commercial success. The company has revolutionised at-home training, and with some luck from worldwide events, they experienced a significant surge in popularity. However, this influx of new customers and revenue wasn’t managed well, and now the company is only a shadow of its former self. Nevertheless, we will focus on the details that enabled their initial success.
Around 2011, John Foley and his wife loved going to the gym, but due to professional duties and the recent arrival of a child, they found it increasingly difficult to find the time to commute to the gym and exercise. While they could train at home, exercising alone was no match for attending in-person classes with an instructor. Training at home, though much more convenient, also lacked the motivational atmosphere and community of a gym. That’s why Foley, an executive at Barnes & Noble at the time, decided to pitch the idea of giving people the full experience of working out in a high-end studio cycling class from the comfort of their own home to Tom Cortese and other colleagues. The company was founded in January of the following year, and by the next month, it had already raised $400,000 in seed money and then $3,500,000 by the end of the year. The company’s first physical product (Peloton Bike) was sold on Kickstarter in 2013 for an early bird price of $1,500.
Following their successful Kickstarter campaign in 2013, Peloton continued to grow rapidly. In addition to direct equipment sales, their business model included selling subscriptions that allowed users to watch instructional videos or attend live exercise classes. To fulfil this need, the company opened its first filming studio in New York City in 2014. Over the next few years, Peloton sustained steady growth while continuously enhancing its portfolio. Peloton began positioning itself as a premium brand with the addition of new commercial-grade bikes for home use. They also launched their app, separate from the equipment, to boost subscription numbers. The year 2018 was particularly significant for the company as they launched a major new product: a high-end treadmill called Peloton Tread. This treadmill featured a large screen for streaming running and bootcamp classes, helping to diversify Peloton’s offerings and appeal to a broader audience.
In 2019, Peloton went public with an initial public offering valued at $8.1 billion. However, the real defining moment for the company came in 2020. With the COVID-19 pandemic making gym attendance even more difficult or even impossible at times, people started looking for alternatives, and Peloton was well-positioned to capitalise on this shift. Their sales and subscription numbers skyrocketed, and stock prices peaked in January 2021. Unfortunately, the company’s success wasn’t without challenges. While demand was enormous, driven by social media and celebrity-based campaigns, the same global situation that drove demand also made scaling the business more difficult. Supply chain issues and delivery delays frustrated customers. In 2021, Peloton faced a major setback when it had to recall some of its treadmills due to safety concerns. As the pandemic waned and gyms reopened, Peloton’s growth slowed significantly. The company was left with a large amount of unsold stock from ramped-up production and struggled to sell it. Peloton tried to introduce new revenue streams by selling merchandise and gym apparel, and expanded their training offerings with AI-powered personal trainer cameras that supported a wider variety of fitness disciplines. Despite these efforts, the company’s stock prices are much lower than they once were, and they have had to downsize significantly, with the founder leaving in 2022. Nowadays, the future of Peloton remains uncertain.
What remains interesting is the technology behind the company and how they built their infrastructure. The entire system is quite complex, featuring central studios for training, streaming and numerous individual devices. All gym equipment requires communication between sensors and control hardware within the bikes and treadmills. Most devices would be equipped with Bluetooth and Wi-Fi modules for external communication as well.
The tablets mounted on Peloton bikes run a custom version of the Android operating system. The first generation of hardware operated on Android 4.1.1, while later devices switched to Android 7.x. Since the underlying OS is still Android, older devices can be rooted and unlocked, allowing the outdated hardware to be repurposed. Although this procedure is not officially supported, it is relatively common, and many guides are available online. Regarding the CPU, the tablets need substantial processing power to handle all necessary tasks. The third generation of the Peloton Bike features a 2.0 GHz Mediatek MT8173 quad-core processor with 2 GB of RAM. Newer, more premium products are equipped with an even more powerful 2.5 GHz Qualcomm QCS605 processor, which is specifically designed for IoT devices.
Image of the new motherboard in the Generation 2 Tread+ screen. Image credit FCC filings.
Regarding the software side, it’s challenging to pinpoint the exact programming languages used in Peloton’s production deployment. However, due to the system’s complexity It is likely that multiple languages are employed. For instance, the sensors are probably managed using C, while data processing tasks might utilize languages like Python. This diversity is supported by Peloton’s GitHub, which hosts several smaller open-source projects written in various languages, including not only the ones mentioned but even Go and Ruby.
As for the cloud architecture, there is no definitive source confirming the exact providers used by Peloton, but it is highly probable that they rely on AWS. Numerous articles discussing the development of Peloton’s recommendation algorithms reference various AWS services for storage, database/cache hosting, and computing, suggesting AWS plays a significant role in their infrastructure.
Subscription Monetisation in IoT: Lessons from Peloton
One of Peloton’s most influential moves was its early adoption of the subscription-based model layered onto its IoT hardware. Beyond the sale of premium bikes and treadmills, the company achieved recurring revenue by offering structured training programs, live leaderboards, and on-demand fitness classes via an integrated app.
For UK startups building connected devices—whether fitness-related, smart kitchenware, or home automation—this model holds immense potential. Unlike one-off device sales, subscriptions ensure ongoing revenue while building user loyalty. The key is creating content or value that users can’t get elsewhere. Peloton succeeded because it paired expert content with a seamless digital interface.
However, UK-based companies must also account for regional billing requirements, compliance (like handling recurring payments under FCA guidelines), and varied consumer protection laws. They can further improve retention by offering hybrid models: for example, a base-tier subscription for community features and premium tiers for tailored AI fitness coaching, VR integration, or third-party app sync (e.g., Strava or MyFitnessPal).
Companies operating within the UK or selling to British consumers should also align with cultural nuances. Fitness trends (like HIIT, outdoor training, or mental health-focused workouts) vary from region to region and seasonally—something Peloton expanded into only later. A successful monetisation strategy must stay responsive and locally relevant.
Revamping peloton homescreen experience with personalized rows
Lessons learned from building context aware recommender systems
Designing an early stage recommender system
Building an IoT Brand: Premium Perception vs. Long-Term Loyalty
Peloton aggressively marketed itself as a premium brand, using minimalist hardware design, celebrity endorsements, and exclusive content to appeal to affluent, status-conscious users. While this created early buzz, it also alienated price-sensitive buyers and limited flexibility during later downturns.
UK brands entering the connected device space should weigh brand positioning carefully. In a mature market like the UK, value-consciousness competes with brand loyalty. While early adopters may pay £2,000+ for a smart fitness setup, mass market penetration often relies on scalable options, such as lower-cost SKUs, refurb programs, or subscription-only tiers without hardware purchase.
Additionally, building loyalty in the UK often relies more on authenticity and product reliability than hype. British customers place a high value on transparency, sustainability, and real customer support. Brands should prioritise long-term customer care, data privacy policies (in line with UK GDPR), and clear upgrade pathways. Community-building and localisation (e.g., British instructors, regional playlists, or language settings) could have helped Peloton’s appeal and could make or break similar ventures targeting this market.
IoT Device Lifecycle Management: Hardware Obsolescence & Sustainability
One of Peloton’s biggest long-term weaknesses was hardware lock-in and eventual obsolescence. Many early-generation bikes were unable to receive new features, leading users to either upgrade or abandon the platform. In the UK, where sustainability and right-to-repair discussions are active, this could be damaging to brand trust.
Emerging IoT companies must consider how their devices will remain functional over time. UK consumers increasingly expect firmware updates, backward compatibility, and modular hardware design—especially when paying premium prices. Failure to offer these can quickly lead to bad reviews or legal challenges under UK consumer protection law.
Peloton could have benefited from offering certified upgrade kits, cross-generational compatibility, and clearer messaging around lifespan. Similarly, any IoT brand operating in or entering the UK should consider partnerships with repair networks, buy-back programs, or circular economy models that align with national carbon reduction goals and e-waste policies.
The Role of AI in Enhancing Connected Fitness Experiences
Peloton’s move into AI-driven personal coaching, smart form correction, and personalised workout recommendations was a late but necessary pivot to stay competitive. AI can transform IoT experiences from passive monitoring into active, evolving user support.
For fitness brands in the UK, AI-driven IoT platforms can personalise user journeys: adjusting difficulty in real time, recommending recovery routines, or flagging injury risks using posture analysis. Integrating ML into devices also enables adaptive content—something British consumers increasingly expect from smart home and wellness tech.
However, with AI comes scrutiny. The UK’s upcoming AI regulation bill is likely to impose stronger transparency standards on algorithmic decision-making. IoT companies should ensure their AI systems are explainable, auditable, and don’t violate users’ health data rights—especially in scenarios involving physical movement or safety.
How Peloton Scaled Too Quickly: Managing Demand with IoT Infrastructure
Peloton’s 2020–2021 surge revealed the fragility of scaling connected hardware. Despite booming demand, they struggled with manufacturing bottlenecks, global chip shortages, and complex logistics. Their just-in-time model wasn’t prepared for a global surge.
IoT firms should see this as a cautionary tale. The UK’s departure from the EU, global shipping disruptions, and geopolitical uncertainty make resilient supply chains a necessity. Brands must forecast demand, hold emergency buffer stock, and pre-test server loads for backend services. Partnering with local UK-based contract manufacturers or EU factories can reduce lead times.
IoT infrastructure—especially video streaming, sensor telemetry, and API request loads—should scale automatically and use region-aware routing. The UK market, for instance, demands strong uptime and privacy safeguards due to stricter data expectations. Edge computing and multi-cloud resilience are no longer luxuries but requirements.
Repurposing & Hacking: The Double-Edged Sword of Openness
Many early-generation Peloton devices have been rooted and repurposed—some into general-purpose Android tablets, others as open-streaming devices. While this is a testament to consumer innovation, it also reveals a tension between open-source culture and proprietary product ecosystems.
UK developers often embrace openness, and customers value freedom of use—especially with costly products. IoT companies should consider where they draw the line: do they embrace hacking with open SDKs and dev kits, or do they lock down hardware to protect monetisation?
Companies can get ahead by offering sandboxed developer environments, certified modding APIs, or public-facing device APIs. This satisfies tech-savvy audiences while retaining platform control. Moreover, this openness supports integration with NHS services, health platforms like Apple Health or Google Fit, and opens the door for third-party innovation, vital in a tech-literate region like the UK.
In conclusion, Peloton’s journey illustrates the potential and challenges of monetizing IoT devices in the fitness industry. By combining innovative hardware with engaging content and a subscription model, Peloton initially captured a significant market share and revolutionized at-home fitness. Their success demonstrates the power of connecting physical products with digital services to create a comprehensive user experience. However, Peloton’s story also serves as a cautionary tale, highlighting the importance of adaptability, supply chain management, and sustainable growth strategies in the rapidly evolving IoT landscape. As the fitness tech market continues to evolve, companies can learn valuable lessons from Peloton’s rise and subsequent struggles to better navigate the complexities of IoT monetization and maintain long-term success.
Conclusion: Monetising IoT the Peloton Way—What Works and What Doesn’t
Peloton’s story is both a blueprint and a cautionary tale for IoT-driven businesses. The company successfully created a market where none existed, combining connected fitness hardware, premium content, and a recurring subscription model. By turning the solitary act of home training into an immersive, competitive, and social experience, Peloton proved that IoT is about much more than data—it’s about delivering value through integration, interactivity, and emotion.
However, their later missteps—overproduction, scaling without flexibility, and hardware obsolescence—underscore the importance of sustainable growth and customer trust. For companies designing IoT devices in sectors from health tech to smart homes, the biggest takeaways include:
- Layering recurring value on top of hardware (e.g., subscriptions, AI coaching, dynamic content).
- Designing for device longevity and modular upgrades, especially in regions with right-to-repair expectations.
- Balancing a premium brand image with accessibility, especially in price-sensitive or publicly regulated markets.
- Building infrastructure that scales dynamically and legally, particularly for compliance-heavy regions like the UK.
For British tech entrepreneurs and global companies targeting the UK, attention to privacy laws, localisation, transparent pricing, and post-sale support will be essential. Success in IoT isn’t just about making connected devices—it’s about building experiences that keep people connected.
Frequently Asked Questions
Q1: What was the main reason Peloton succeeded initially?
Peloton’s early success came from combining connected hardware with premium subscription content, creating a sense of community and motivation at home. Their timing during the rise of at-home fitness also gave them a massive advantage.
Q2: Can the Peloton model be applied outside of fitness?
Yes. Any industry with physical devices and digital engagement—smart kitchens, medical monitoring, environmental sensors—can adopt a similar approach by pairing hardware with software, services, or content subscriptions.
Q3: Is a subscription model viable for UK consumers?
It can be, especially when priced transparently. UK consumers value flexibility, so offering monthly rolling subscriptions, free trials, and cancellation options are key to adoption and retention.
Q4: What regulatory issues should IoT companies watch in the UK?
Key considerations include UK GDPR, PSTI Act (Product Security and Telecommunications Infrastructure), and digital services regulations. Companies must ensure secure data handling, transparent AI recommendations, and safe device defaults.
Q5: Should I lock down my IoT device or allow modification?
It depends on your monetisation strategy. Allowing safe, developer-friendly extensions or offering APIs can create a loyal community. However, you’ll need to safeguard core services and customer data to avoid misuse.
Want to learn more about Peloton? Please check our Shorts about their monetization model:
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