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‘We are seeing volume and interest in Peloton explode,’ says company president on listing day

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This morning, Peloton (NASDAQ: PTON), the tech-enabled stationary bicycle and fitness content streaming company, raised $1.2 billion in its NASDAQ initial public offering. Despite dropping more than 10% in its first day of trading — ultimately closing down 11% at $25.84 per share — the IPO was a bona fide success. Peloton, once denied (over and over again) by VC skeptics, now has hundreds of millions of dollars to take its business into a new era. One in which, the media, hardware, software, logistics and social company attempts to become a generation-defining company akin to Apple.

Founded in 2012 — six years after Soul Cycle opened its first cycling studio in New York’s Upper East Side and two years before a Soul Cycle founder, Ruth Zukerman, jumped ship to launch her own indoor cycling business, Flywheel Sports — a man by the name of John Foley made the ambitious, some might say foolish, decision to start a company that would sell these exercise bikes direct-to-consumer. That way, you could take a Soul Cycle class, in essence, in the comfort of your own home. Even better, technology would improve the experience.

As my colleague Josh Constine recently described it, these bikes come outfitted with a 22-inch Android screen, transforming an outdated exercising experience and bringing it into 2019: “It makes lazy people like me work out. That’s the genius of the Peloton bicycle. All you have to do is Velcro on the shoes and you’re trapped. You’ve eliminated choice and you will exercise,” Constine writes.

Peloton’s ability to get people exercise — a feature driven by its talented instructors (some of whom were poached from competitor Flywheel Sports) — ultimately had venture capital investors funneling $1 billion, roughly, into the business. Today, Peloton operates dozens of showrooms across the U.S., counts 1.4 million total community members — defined as any individual who has a Peloton account — and over 500,000 paying subscribers. Why? Because the company, as stated in its IPO prospectus, “sells happiness.”

“Peloton is so much more than a Bike — we believe we have the opportunity to create one of the most innovative global technology platforms of our time,” writes Foley. “It is an opportunity to create one of the most important and influential interactive media companies in the world; a media company that changes lives, inspires greatness, and unites people.”

Peloton’s flagship product, a tech-enabled stationary bike.

Peloton’s community coupled with the high margins on sales of its $2,245 bikes had the company reporting $915 million in total revenue for the year ending June 30, 2019, an increase of 110% from $435 million in fiscal 2018 and $218.6 million in 2017. Its losses, meanwhile, hit $245.7 million in 2019, up significantly from a reported net loss of $47.9 million last year.

What’s next for Peloton? The opportunities are endless, given the company’s firm seat at the intersection of hardware, software, media content and more. A third product may be in the works, expansion to international markets or new instructors. Peloton is going after a massive market ripe for disruption. What’s certain is that we’ll see a whole lot of cash flowing into fitness tech copycats in the next couple of years.

Peloton, following a number of lukewarm consumer IPOs (Uber), nearly doubled its valuation to $8.1 billion this morning after pricing its IPO at the top of its range, $29 per share. To answer some of our most burning questions, we chatted with Peloton’s president William Lynch, the former CEO of Barnes & Noble, about the float.

The following conversation has been edited for length and clarity.

William Lynch

Peloton president and former Barnes & Noble CEO William Lynch.


Kate Clark: What’s next for Peloton?
William Lynch: We now have over a billion in capital to fuel more growth, especially in the area of product innovation.

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Biz & IT

Netflix’s ad-supported plan likely to have another drawback: No video downloads

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Getty Images | Bloomberg

The presence of advertisements apparently won’t be the only major difference between Netflix’s ad-supported and ad-free plans. Text reportedly found in the code of Netflix’s iPhone app suggests the ad-supported plan won’t let users download movies and shows for offline viewing.

The text says, “Downloads available on all plans except Netflix with ads,” according to a Bloomberg report yesterday. The text was discovered by iOS developer Steve Moser, who wrote about it on his blog. Unsurprisingly, the Netflix app “code also suggests that users won’t be able to skip ads—a common move in the streaming world—and playback controls won’t be available during ad breaks,” Bloomberg wrote.

Netflix has been offering video downloads in its apps since late 2016. A Netflix spokesperson told Ars, “We are still in the early days of deciding how to launch a lower-priced, ad-supported tier and no decisions have been made. So this is all just speculation at this point.”

Moser’s blog post said he also found Netflix app text from a setup process for new subscribers who select the ad-supported plan. The text refers to the use of personalized ads. “Now, let’s set up your ad experience. We just need a few details to make sure you get the most relevant ads on Netflix. It’ll be really quick, we promise!” the text says.

Hulu similarly makes downloads available only to users on its no-ads plans. HBO Max also requires an ad-free plan for downloads.

Ad tier planned for early 2023

After years of resisting ads, Netflix Co-CEO Reed Hastings announced in April that the streaming service will offer an ad-supported tier. Netflix says it plans to launch the ad-supported tier in early 2023.

Netflix prices in the US range from $9.99 for “Basic” to $19.99 a month for “Premium.” Netflix says the “lower priced ad-supported subscription plan” will be offered “in addition to our existing ads-free basic, standard, and premium plans.”

Netflix hasn’t said what the ad-supported plan will cost or whether it will have other limits like the ones in Netflix’s cheapest current plan. The Basic plan, which is currently the cheapest option, does not provide high-definition video and has two other notable limits: Basic users can’t watch on more than one screen at a time, and they can only download videos on one phone or tablet.

The $15.49-per-month Standard plan allows HD video and lets subscribers watch on two screens simultaneously and download videos on two devices. The $19.99 Premium plan allows 4K viewing, the ability to watch on four screens simultaneously, and downloads on up to four devices.

Netflix losing subscribers

Netflix is also cracking down on account-sharing by testing an “extra member” fee in some countries and an “extra home” fee in others. A Netflix letter to shareholders said the company aims to complete a broader rollout of sharing fees next year.

Netflix last month reported a loss of 970,000 paid streaming subscribers in Q2 earnings after having lost 200,000 customers in the first quarter of 2022. Worldwide paid memberships decreased from 221.64 million to 220.67 million in Q2, and revenue growth has slowed dramatically.

Netflix says the ad-supported tier is key to improving revenue and profits. “While it will take some time to grow our member base for the ad tier and the associated ad revenues, over the long run, we think advertising can enable substantial incremental membership (through lower prices) and profit growth (through ad revenues),” Netflix’s quarterly letter to shareholders said.

Netflix hired Microsoft to provide advertising technology, saying that “Microsoft offered the flexibility to innovate over time on both the technology and sales side, as well as strong privacy protections for our members.”

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Zoom patches critical vulnerability again after prior fix was bypassed

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Enlarge / A critical vulnerability in Zoom for MacOS, patched once last weekend, could still be bypassed as of Wednesday. Users should update again.

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It’s time for Zoom users on Mac to update—again.

After Zoom patched a vulnerability in its Mac auto-update utility that could give malicious actors root access earlier this week, the video conferencing software company issued another patch Wednesday, noting that the prior fix could be bypassed.

Zoom users on macOS should download and run version 5.11.6 (9890), released August 17. You can also check Zoom’s menu bar for updates. Waiting for an automatic update could leave you waiting days while this exploit is publicly known.

Zoom’s incomplete fix was reported by macOS security researcher Csaba Fitzl, aka theevilbit of Offensive Security. Zoom credited Fitzl in its security bulletin (ZSB-22019) and issued a patch the day before Fitzl tweeted about it.

Neither Fitzl nor Zoom detailed how Fitzl was able to bypass the fix for the vulnerability first discovered by Patrick Wardle, founder of the Objective-See Foundation. Wardle spoke at Def Con last week about how Zoom’s auto-update utility held onto its privileged status to install Zoom packages but could be tricked into verifying other packages. That meant malicious actors could use it to downgrade Zoom for better exploit access or even to gain root access to the system.

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Ring patched an Android bug that could have exposed video footage

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Enlarge / Ring camera images give you a view of what’s happening and, in one security firm’s experiments, a good base for machine learning surveillance.

Ring

Amazon quietly but quickly patched a vulnerability in its Ring app that could have exposed users’ camera recordings and other data, according to security firm Checkmarx.

Checkmarx researchers write in a blog post that Ring’s Android app, downloaded more than 10 million times, made an activity available to all other applications on Android devices. Ring’s com.ring.nh.deeplink.DeepLinkActivity would execute any web content given to it, so long as the address included the text /better-neighborhoods/.

That alone would not have granted access to Ring data, but Checkmarx was able to use a cross-site scripting vulnerability in Ring’s internal browser to point it at an authorization token. Next, Checkmarx obtained a session cookie by authorizing that token and its hardware identifier at a Ring endpoint and then used Ring’s APIs to extract names, email addresses, phone numbers, Ring device data (including geolocation), and saved recordings.

Checkmarx’s video, featuring footage tests and a hoodie-wearing hacker.

And then Checkmarx kept going. With access to its own example users’ recordings and any number of machine-learning-powered computer vision services (including Amazon’s own Rekognition), the security firm went wide-angle. You could, the firm found in its tests, scan for:

  • Safes, and potentially their combinations
  • Images of documents containing the words “Top Secret” or “Private”
  • Known celebrities and political figures
  • Passwords and passcodes
  • Children, alone, in view of a Ring camera

To be clear, the vulnerability was seemingly never exploited in the wild. Checkmarx reported it on May 1, Amazon confirmed its receipt the same day, and a fix was released (3.51.0 for Android, 5.51.0 for iOS). Checkmarx says that Amazon responded to the high-severity issue with acknowledgment but also deferral. “This issue would be extremely difficult for anyone to exploit because it requires an unlikely and complex set of circumstances to execute,” Amazon told Checkmarx.

Erez Jalon, VP of security research at Checkmarx, told The Record that taped-together vulnerabilities are coveted among hackers.

“Each would be problematic, but chaining them together, something hackers always try to do, made it so impactful.”

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