WEBVTT - Peloton Interactive CEO Peter Stern Talks New Products' Price Point

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>It's time now for the stock of the hour, and

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<v Speaker 2>it is Peloton. The shares are falling after the company

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<v Speaker 2>announced an overhaul of its hardware as well as raising prices.

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<v Speaker 2>This is Peloton's first major attempt under new leadership to

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<v Speaker 2>lift the company out of a multi year slump. So

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<v Speaker 2>perhaps there's no better timing than to bring in the CEO,

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<v Speaker 2>Peter Stern, who is behind this products revamp, and of

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<v Speaker 2>course Bloomberg Tech co host Caroline Hyde also joins us.

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<v Speaker 3>Now.

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<v Speaker 2>Peter, welcome to Bloomberg. Thank you for speaking with us.

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<v Speaker 2>Big hardware line, a big AI platform, Peloton IQ coming

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<v Speaker 2>out today. Long anticipated, but the market appears underwhelmed. And

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<v Speaker 2>I know that you don't follow this stock move on

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<v Speaker 2>a day to day, minute by minute basis, But what

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<v Speaker 2>my investors not fully appreciate about this announcement.

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<v Speaker 4>First of all, Scarla, thanks for having me here. And

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<v Speaker 4>I leave the day to day gyrations of the stock

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<v Speaker 4>to the experts, traders, the analysts, folks like yourselves. That

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<v Speaker 4>being said, if you look at the if you take

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<v Speaker 4>the long view, let's look back a year, our stock

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<v Speaker 4>is almost doubled. Look back a month way up, so

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<v Speaker 4>I wouldn't focus on day to day, but I would

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<v Speaker 4>focus on the news that we announced today because it's

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<v Speaker 4>pretty amazing what we just announced. Completely new lineup of equipment,

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<v Speaker 4>peloton Iq, our Ai powered personal trainer, big moves into

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<v Speaker 4>total wellness. So it'll play out over time as people

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<v Speaker 4>see the value and they start to embrace these things.

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<v Speaker 1>Who sees the value not just an investor, but your

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<v Speaker 1>stakeholder is me who owns Pelotine Bike, thinking about is

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<v Speaker 1>it me who's going to upgrade? Is it a whole

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<v Speaker 1>new cohort that comes in and buys these more pricey

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<v Speaker 1>products but with more built in cameras, more effective nature

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<v Speaker 1>of wellness.

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<v Speaker 3>I'm sure yeah. So.

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<v Speaker 4>Caroline, first of all, thanks so much for being a member.

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<v Speaker 4>It's great to have a fellow member here. And we

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<v Speaker 4>are focused both on existing members as well as non members.

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<v Speaker 4>For existing members, they're getting so much today. We are

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<v Speaker 4>introducing forever ever, regardless of when you bought your equipment,

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<v Speaker 4>the benefits of peloton Iq, and that's just included in

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<v Speaker 4>your membership. We are now including a new acquisition that

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<v Speaker 4>we did a company called breath Work, because we know

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<v Speaker 4>the power of breathing and how it can help people

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<v Speaker 4>with stress and anxiety and depression and improve heart rate

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<v Speaker 4>variability and improve blood pressure.

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<v Speaker 3>So everyone's getting that.

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<v Speaker 4>Major partnerships, for example, one with the Hospital for Special

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<v Speaker 4>Surgery to focus on injury prevention and rehabilitation. All of

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<v Speaker 4>these things happen for existing members, but if you're not

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<v Speaker 4>an existing member, there has never been a better time

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<v Speaker 4>to become one. With the launch of this all new

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<v Speaker 4>equipment lineup the Cross Training Series. Now we're delivering the

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<v Speaker 4>benefits of both cardio and strength because we know that

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<v Speaker 4>adults should be doing a couple of hours at least

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<v Speaker 4>a week of cardio and two days of strength training

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<v Speaker 4>every week. You can do that now, all with one

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<v Speaker 4>piece of equipment. That makes it super easy.

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<v Speaker 1>It's almost in many ways like Cross Training way that

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<v Speaker 1>which you're sort of identifying it. But if I look

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<v Speaker 1>at the analyst notes and maybe the reaction from the

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<v Speaker 1>stock is because a lot of this have been baked in,

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<v Speaker 1>you've already given us full year forecasts. Then in many

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<v Speaker 1>way talk about what churn you're expecting, but what subscriber growth,

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<v Speaker 1>what do you think this will spur in terms of sps.

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<v Speaker 4>So we knew, of course as we went into this

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<v Speaker 4>year what we were going to be launching, and we

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<v Speaker 4>were able, as you point out, Caroline, to bake all

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<v Speaker 4>of that into our guidance for the year. But we

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<v Speaker 4>also included in our guidance that as the year progresses,

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<v Speaker 4>we will be inflecting back toward growth. And that's a big,

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<v Speaker 4>big step for us as a company.

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<v Speaker 3>We had a couple of.

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<v Speaker 4>Years where we've been down as we have regrouped after

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<v Speaker 4>the pandemic, and we are now in such a good

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<v Speaker 4>place where you see us having reignited our innovation engine.

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<v Speaker 4>Of course, our customer love has never left us. Customers

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<v Speaker 4>really just appreciate what Peloton does for them, and in

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<v Speaker 4>particular have that deep connection with our instructors. So we're

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<v Speaker 4>building on that foundation and now feel more confident about

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<v Speaker 4>our future than ever before.

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<v Speaker 2>I like we said earlier about how existing members will

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<v Speaker 2>have the benefits of the new software, but will you

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<v Speaker 2>continue to support the existing hardware and software if customers

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<v Speaker 2>don't upgrade to the new equipment, Because down the road,

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<v Speaker 2>at some point, you want to get everyone to the

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<v Speaker 2>new model of Peloton equipment, don't.

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<v Speaker 3>You, Scarlett.

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<v Speaker 4>We build our products to last these the bikes that

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<v Speaker 4>we have today are still beautiful, even the original bikes,

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<v Speaker 4>they are absolutely beautiful, and they are fully functional. Our

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<v Speaker 4>treads are designed to last, the rose designed to last.

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<v Speaker 4>We're continuing to support them. We are not in the

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<v Speaker 4>obsolescence business. Whatever it takes for you to get and

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<v Speaker 4>stay fit, we want to support you on that journey.

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<v Speaker 1>You said about the growth trajectory, the inflection is that

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<v Speaker 1>profitable growth.

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<v Speaker 3>When are we going to get?

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<v Speaker 4>Absolutely so we you know, I'm so pleased that we

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<v Speaker 4>have now been able to deliver five consecutive quarters of

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<v Speaker 4>significant and free cash flow, and so this is now

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<v Speaker 4>a company that we're running in a very disciplined way

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<v Speaker 4>and we're delivering real profitability. And I think you can

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<v Speaker 4>see that in the year over year changes in the

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<v Speaker 4>stock price, where we're up considerably because people now feel

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<v Speaker 4>so confident about the future.

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<v Speaker 1>And you're confident in the price point. What's so interesting

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<v Speaker 1>is that what point do you see that elasticity? How

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<v Speaker 1>high can you push me when I've got loyalty to

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<v Speaker 1>a tounda to Cody Risby, how much do you think

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<v Speaker 1>that I will continue to add on price points? When

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<v Speaker 1>it comes to the bike to the tread to the subscription.

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<v Speaker 4>So we know that every dollar is precious and people

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<v Speaker 4>are considering how to spend their money these days, and

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<v Speaker 4>so we're very careful about what we do here. But

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<v Speaker 4>we're also looking at the value that we deliver, and

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<v Speaker 4>we know that, you know, if people are going to

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<v Speaker 4>invest in something, they should be investing in their health,

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<v Speaker 4>in their well being, in their longevity and how they

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<v Speaker 4>feel both physically and about themselves. And Peloton allows them

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<v Speaker 4>to get a great return on that investment.

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<v Speaker 3>So we did do a price increase.

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<v Speaker 4>It was the first change in our all access membership

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<v Speaker 4>in over three years.

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<v Speaker 3>We were very thoughtful about what that was.

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<v Speaker 4>And we hope that our members appreciate all of the

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<v Speaker 4>additional benefits that we've provided them over the last year,

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<v Speaker 4>for example, adding about twelve thousand more classes, forty more programs,

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<v Speaker 4>more modalities, things like weighted vest workouts, as well as

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<v Speaker 4>what we just announced today, which is the introduction of

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<v Speaker 4>Peloton Iq, which provides basically the benefits of a personal

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<v Speaker 4>trainer in your home.

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<v Speaker 2>I want to get your sense of the competitive landscape.

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<v Speaker 2>When you look at music streaming services, people usually have

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<v Speaker 2>only one they pick Spotify or they pick Apple Music

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<v Speaker 2>for actual streaming of television shows, maybe they have a

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<v Speaker 2>couple of them. When it comes to fitness and wellness,

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<v Speaker 2>what's your sense of how many people are willing to

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<v Speaker 2>hold on to and pay for.

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<v Speaker 4>Yeah, so, first of all, we're happy for you to

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<v Speaker 4>work out in whatever ways you choose to and in

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<v Speaker 4>as many ways as you do. But our focus is

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<v Speaker 4>on making sure that peloton can be the answer for you,

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<v Speaker 4>regardless of what aspect of total health you're focused on. Cardio,

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<v Speaker 4>of course, is where we started and we're known for

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<v Speaker 4>that between our row, our tread, and of course the bike.

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<v Speaker 4>But now strength is a huge area of focus for us.

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<v Speaker 4>We know people are recognizing the importance of strength training

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<v Speaker 4>in particular as we grow older in terms of building

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<v Speaker 4>a maintaining muscle mass and what it does, for example,

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<v Speaker 4>for our metabolic function.

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<v Speaker 3>So we're a great solution for that.

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<v Speaker 4>With the cameras that we launched today in our plus line,

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<v Speaker 4>we're able to count your reps, we're able to give

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<v Speaker 4>you feedback, we're able to suggest when you should be

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<v Speaker 4>up in your weights. Then we get to things like

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<v Speaker 4>mental well being. We talk about breath work, our meditations,

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<v Speaker 4>the work that we do with yoga.

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<v Speaker 3>All these things help.

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<v Speaker 1>So, I mean and I can see that the strength

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<v Speaker 1>halle Berry perimenopausal. You're thinking about a wellness trajectory very briefly.

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<v Speaker 1>P Five years from now, how do you see yourself

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<v Speaker 1>in the finest landscape.

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<v Speaker 4>Yeah, So we intend to be your essential partner in

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<v Speaker 4>the journey to feeling better about yourself and living your

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<v Speaker 4>best life. And that means not just focusing on the

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<v Speaker 4>quantity of years that you have on this planet.

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<v Speaker 3>But the quality of those years.

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<v Speaker 4>And we know that there are choices that we can make,

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<v Speaker 4>behavioral choices that we can make that make a difference

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<v Speaker 4>in the quality of those years. Those are am I

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<v Speaker 4>doing cardio? Am I doing strength? Am I taking care

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<v Speaker 4>of my mental well being? Am I eating right? If

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<v Speaker 4>I need supplements? Am I taking the right supplements? Am

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<v Speaker 4>I sleeping right? We can make a difference in every

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<v Speaker 4>one of those areas, and we intend to.

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<v Speaker 2>Peter Stern a pleasure. Thank you so much for joining

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<v Speaker 2>us today. CEO of Peloton, Peter Stern joining us along

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<v Speaker 2>with the Bloomberg Tech co host Caroline High