Phish, Peloton, and The Untapped Economics of Irrational Enthusiasm

It’s been far too long since I’ve picked up the pen and posted a piece here. So, with a bit of New Year’s energy, I’ve resolved to write more. And, as a first step, I’d like to explore an idea I’ve had for a series of sorts.

For years, it has been my belief that innovators in music are an amazing source of inspiration for any brand in any industry. So, with each installment in this nascent series, I’m going to pair up an innovative artist with a brand that I believe can learn from that artist.

To begin, we’re going to pair Phish with Peloton. Yes, that’s right. I believe that the now-spluttering pandemic craze can learn a lot from a graying and grizzled jam band.

Let’s get into it.

Peloton’s Irrational Economics

Though I was quite late to the Peloton party, suffice it to say that Peloton has quite the hold of me and my family. Over the past year, I’ve averaged over 1,400 minutes per month working out with Peloton in various ways. Yes, I know. That level of enthusiasm is more than a little irrational. I’ll own that, but I’ll also mention that many people make my level of enthusiasm look completely casual by comparison.

But what is truly irrational are the economics of my relationship with Peloton. For the 1,400+ minutes that I use Peloton’s services every month, I pay a sum total of $44. Or around 3 cents per minute. But wait, it’s actually far worse: my wife is also an avid Peloton user and my older daughter gets in the game now and again and the Peloton membership is for our entire family which means that the per minute monetization of our family is… somehow even worse than the monetization of music streaming.

I believe that the worst bit of this is that the $44/month that my family pays is the same as someone who works out once per month. Put differently, Peloton has not figured out how to monetize my family’s irrational enthusiasm any differently than someone who signed up for a membership and just hasn’t gotten around to canceling it.

Now one might argue that this flat monetization is precisely the point. You might point to health clubs and all the money they make off of people who are members but never go. You could state the claim that Peloton is a tech business and their flat-rate subscription business is infinitely scalable (SaaS for sweat, you might say).

But I believe that the Phish fervor that is about to descend upon Mexico illuminates why these flatline monetization models are very misguided. Or, at the least, very incomplete.

Phish’s Enticing Economics of Irrational Enthusiasm

Phish– like almost every artist and brand– has a core of highly “irrational” superfans who truly want to spend thousands of dollars to more deeply immerse themselves in the band (and community of fans) that they love. These enthusiastic fans are dramatically less price-sensitive than casual fans. So, if Phish were to lazily rely only upon streaming revenue that monetizes every fan in the same way, they (like Peloton) would leave a ton of money on the table.

Next month, for the seventh year running, Phish will set up on the sands of the Riviera Maya with thousands of their most passionate fans. Part mini-residency, part destination travel, part cult gathering, part hacky sack joke in the making, this Yucatan adventure has become a reliable way for Phish to monetize their most enthusiastic superfans… a lesson that Peloton would be well-served to follow.

Peloton x Phish

So (ahem) I guess I’m kind of like a Phish fan. I actually want to spend a lot more money on Peloton. I want to further feed my irrational enthusiasm.

Now, of course, I know that Peloton must continue to grow its subscriber base. I know that they need to obsess over churn rates. And I can imagine that there’s a marketing survey out there that cites that one of the top reasons why some people don’t think Peloton is a brand “for them” is the assumption that Peloton is entirely comprised of lunatics like me. Which, I suppose, is why they are trying insanely lazy Burger King-esque TV ads saying that on Peloton you can “Work Out Your Way.”

But the broader point I’m making is that when you have a brand that kindles irrational enthusiasm, one of your most important priorities is figuring out how to monetize that enthusiasm (in addition to growing your user base).

You know, like Phish.

But, right now, Peloton perplexingly makes it difficult for me to work out how to spend the kind of money that matches my enthusiasm.

Sure, I could go buy more pricey Peloton hardware (a treadmill, etc.). But betting that I want another piece of hulking hardware in my home misses the point of my Peloton enthusiasm (and a quick look at their financials shows that Peloton loses money on their hardware business anyway).

Sure, I could go buy merch. Much like in the world of music, selling t-shirts and the like to fans is one way of making more money off of your biggest fans. But it just happens to be one of the least profitable and least interesting ways to do so.

What am I suggesting? Should Peloton plop down on the sands of the Riviera Maya for a Phish-inspired high-priced destination travel experience of its own? That’s not a bad idea, but the point I’m making is much bigger and broader.

A Framework for Irrational Enthusiasm

I’d like to propose a framework that I think Peloton (and every other brand) could use to monetize the enthusiasm of their biggest fans. My framework has three simple pillars: handshakes, unlocks, and exclusives. For each of these pillars, I’ll suggest a prompt that I believe any brand can put into action… and I’ll throw in a quick idea for Peloton while we’re at it.

Step One: Handshakes

Fully monetizing irrational enthusiasm begins with the connection that begins with recognizing the passion of your most enthusiastic users. Your most passionate fans are not at all like your casual users, and they know that. They want to be spoken to differently, and connected to personally.

LeBron James famously has developed a unique personal handshake with each of his teammates on the Lakers (he even has one with the team photographer). But why did he do this? Developing these uniquely personal handshakes is a way for LeBron to not only strengthen the bond among team members but also reflect his unique connection with each player.

Meanwhile, despite my irrational enthusiasm for Peloton, their outbound communications with me are as generic as they come. Their emails to me are akin to LeBron coming up to the same teammate every day at practice and saying “Hi, I’m LeBron.” And the Peloton app doesn’t even do push notifications right now, which is a lot like a good friend saying she won’t text you and will only send you periodic long-form emails.

The “Handshakes” that a brand has with its superfans don’t need to be as elaborate as Spotify’s Wrapped (although Peloton has more than enough data to do that easily, and you think that their CEO would have taken that idea with him when he came over from Spotify). All you have to do (at least to start) is to stop introducing yourself to the customers who spend the most time with you.

For Peloton, getting some “handshakes” up and running would be super easy. Any (semi)frequent Peloton user inevitably looks at their fitness trends… how they’re doing over time, how this month compares to last month, etc. But, inexplicably, Peloton currently leaves all of this reflection up to their members to do on their own. If Peloton were to do even the basic trend line analysis that folks like Apple Fitness currently do, it would provide the pretext for regular communications with their users and would provide the foundation for further monetization of members’ enthusiasm.

Step Two: Unlocks

The Peloton members out there will immediately nod to the importance of milestones. Baked into every class is the recognition of people who are hitting a milestone (eg, their 100th ride, their 1,000th run, etc). And, for every Peloton member that I know, these milestones mean a lot. I’ve heard multiple stories from people who have re-jiggered their calendars for the entire month so that they could do a live workout on the day that they hit a milestone, fervently hoping that they might get a shout-out from the instructor for their accomplishment.

But the day after a member hits a big milestone, do you know what’s different about their Peloton experience? Absolutely nothing. In the early days of Peloton (when they were rolling in money), when you hit a milestone they would mail you a t-shirt that commemorated your experience. Not surprisingly, this perk got redlined by finance when Peloton started hitting far rockier times.

But what’s worse is that Peloton took the “milestone collection” and just put it in their generic apparel store for all to see and buy (and then they watered it all down with cringe-worthy product copy saying that milestones are “more than a number.” Sigh.) I would argue that all of this is exactly the opposite of what they should be doing.

Brands in any industry can use “unlocks” to open up new revenue streams. All you need to do to start is to identify your industry’s version of “milestones,” and then have those milestones become unlocks for additional commercial opportunities. Done this way, the ability to spend more money on the brand feels like an earned reward, not a generic email announcing this season’s apparel colorways.

Here’s an easy one for Peloton: immediately upon completing a milestone workout, you get a push notification on your phone that invites you to visit a capsule collection that can only be accessed by you and the others who have earned their way into that. This would turn an otherwise overpriced white sweatshirt into a sought-after flex.

Step Three: Exclusives

For the third and final pillar of this enthusiasm framework, let’s bring it back to Phish. More specifically, let’s come back to the fact that a brand’s most passionate fans have radically less price sensitivity than your casual users.

This truth has been popularized in articles like A 1000 True Fans, picked up considerable momentum when all we could talk about were NFTs, and has largely faded from the public conversation as the NFT bubble burst and then effectively disappeared.

While it’s understandable that behavior like paying $1.6 million dollars for a jpeg of an ape wasn’t going to last, the importance of superfan exclusives has never been more important.

And it seems that the music industry at large is finally starting to embrace this. In his New Year’s memo to staff, Universal Music CEO Lucian Grainge announced that “the next focus of our strategy will be… strengthening the artist-fan relationship through superfan experiences and products.” Though details are still scarce, Grainge announced his intention to help “accelerate our artists’ ability to create experiential, commerce, and content offerings for their fans.” You know, like Phish.

For brands, the opportunity here is to think about it as seeking to help fulfill the dreams of your most passionate fans. For these users, what could be a purchase or an experience that would become their profile photo the very next day?

Peloton is perfectly poised to create exclusives like these. As just one example, Ally Love, one of Peloton’s more popular instructors, just so happens to be a superfan of The Rosewood Hotel in Mayakoba, Mexico. At the risk of suggesting an idea that is almost literally what Phish is already doing, I’m confident that if Peloton were to put together a week-long fitness retreat at the Rosewood that was limited to a relatively small number of people there would be virtually no price at which they wouldn’t sell out.

Summing Up: How Phish Can Help Peloton– and Most Every Brand

As I sum up, I’d like to reiterate that I am not suggesting that the pursuit of irrational enthusiasm should become the entirety of the marketing plan for Peloton or any other brand. Of course, brands like Peloton need to continue to grow their subscriber base… much like Phish needs to continue to draw new fans.

What I am suggesting is that irrational enthusiasm is, effectively, a big pile of money that is being left on the table by Peloton and many brands like it. The framework above is a way to improve monetization per user, as you simultaneously push to grow your user base.

And, as a bonus, Mexico is quite lovely in February.

Up Next…

I’m considering a few topics that could become the next installment of this nascent series, but the one I’m leaning toward is how the artist Fred, again can inspire advertisers on the Super Bowl.