Peloton CEO said he wasn’t worried about Flywheel, now he’s suing them

Anyone who has ever ridden a Peloton home cycle knows, it’s not about the bike. The whole draw is the screen, and its competitive leaderboard that shows riders from around the world, and their stats, on each and every ride. That technology is now at the heart of a lawsuit.

On Wednesday, Peloton filed suit against Flywheel, claiming Flywheel infringed upon Peloton’s patents, “by creating a copycat of the Peloton Bike experience called the “FLY Anywhere” that, among other things, detects, synchronizes and compares the ride metrics of remote users on a graphical user interface,” according to the suit filed in United States District Court for the Eastern District of Texas Marshall Division.

The draw of Peloton, which in the six years since its launch has grown its subscription member base to 600,000, has been its unique leaderboard on a screen attached to the cycle. Riders watch their own output scores, a combination of speed and resistance, to their previous rides as well as to riders who have done that specific class live or on-demand.

Peloton has grown to 900 employees and was recently valued at $4.15 billion, earning more than $300 million in revenue in 2017, according to the court filing. Peloton’s growth has so far been in the home cycling space, but at the start of this year it launched a similarly high-tech treadmill, also with a leaderboard. Those treadmills were scheduled to begin shipping next month.

Peloton Cycle

Source: Peloton Interactive Inc.
Peloton Cycle

Flywheel, like its competitor SoulCycle, is largely a studio-based model, with 43 studios nationwide; Peloton is almost entirely home-based fitness classes with the exception of one cycling studio in Manhattan where the classes are live-streamed hourly.

Flyweel launched its FLY Anywhere home platform in November, 2017. Like Peloton, riders can buy the home cycle with a screen and then pay a monthly subscription fee for content or just ride any stationary bike and stream the subscription content on a mobile device or streaming system.

In a December interview previewing the treadmill launch, CEO John Foley said he was not concerned about competition in the stationary cycling space. This is an exerpt:

Soulcycle and Flywheel are fantastic brands and big brands and known national brands for the studio space. They operate great studios and hire instructors and run the local studios. In order for them to become a hardcore technology shop like Peloton, there is a lot that needs to happen. I would not give them a good chance of doing all those things that executionally need to happen to reinvent yourself or reinvent your DNA as an innovation and technology company, which Peloton started as.

I don’t want to be cavalier about the competition. I think that there will be real competition, but from my perspective we would be more worried about a technology company, call it an Amazon, coming into our space, versus a content company trying to figure out what Peloton does. It just doesn’t feel like it’s a viable threat, but we’ll see what happens.

The lawsuit also claims that Flywheel received proprietary information from Peloton via Michael Milken, whose claim to fame was pleading guilty to violating securities laws back in 1990. Milken and Foley met at an invitation-only, J.P. Morgan investor conference.

Foley was pitching to the conference of investors and allegedly spoke to Milken afterward about potentially investing in Peloton. In the conversation, the suit alleges, “Milken held himself out to Foley as an interested, potential investor in Peloton and pushed for information on topics including Peloton’s future business plans and strategy, and how or whether Peloton could protect its intellectual property and exclude others from the at-home cycling business.”

Milken did not, allegedly, disclose that he was a major investor in Flywheel. Milken is not a defendant in the suit.

Andy Wong, chief marketing officer for Flywheel Sports said in a statement, “Flywheel firmly denies the claims raised by Peloton and strongly believes that its ANYWHERE product does not infringe any valid claim of Peloton’s patents. Peloton’s lawsuit is a classic example of a big business trying to intimidate a competitor out of the marketplace.”

“Flywheel is proud of our advancements and will not be intimidated. We intend to vigorously stand up for ourselves against Peloton’s claims, and any attempt to deny customers access to our ANYWHERE at home bike.”

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