Speaker 1: This is Bloomberg Business Week from Bloomberg Radio. I'm Jason
Speaker 1: Kelly and I'm Carol Masser. Welcome to the Bloomberg Business
Speaker 1: Week Extra. It's our weekly podcast bringing you an in
Speaker 1: depth interview you will not hear anywhere else. This week.
Speaker 1: James Park he's the CEO of the chairman, the co
Speaker 1: founder of Fitbit. He's a return guest, Carol, and it
Speaker 1: was really interesting to catch up with him basically a
Speaker 1: year since our last conversation to get a sense of
Speaker 1: where they are. This is a company, as he says,
Speaker 1: very much in transition. Here's that conversation. Talk to us
Speaker 1: about the announcements this week, and let's lead with the service,
Speaker 1: the prime service, because I think that's an interesting um
Speaker 1: expansion of where you guys are going. Yeah. Absolutely, so,
Speaker 1: we had a we have a lot of exciting announcements
Speaker 1: today across software and service as you mentioned, and also
Speaker 1: devices as well. And it's all too in support of
Speaker 1: our company's mission, which is to make everyone in the
Speaker 1: world health here and in particular to make health accessible
Speaker 1: to everybody. That's really important for us. And at the
Speaker 1: same time we're also in the middle of transforming our
Speaker 1: company from being a purely devices company to again being
Speaker 1: more of a services and device company with more predictable,
Speaker 1: recurring revenue streams and premium is a really important step
Speaker 1: in that transformation. So what we announced is a all
Speaker 1: in one, comprehensive health service that takes data right from
Speaker 1: your wrist and turns it into actionable and personalized guidance
Speaker 1: and coaching that helps you get more active, eat better,
Speaker 1: and seed better. It has programs, insights, content, coaching, motivate
Speaker 1: motivation in the form of health games, health report that
Speaker 1: you can take to your doctor. So it's no longer
Speaker 1: just about hey, you took this many steps. It's like, okay,
Speaker 1: you did this, so hey, how here's something else. Absolutely,
Speaker 1: it's it's what's beyond the metrics, It's what's beyond the data.
Speaker 1: So how do we actually coach you and guide you
Speaker 1: to the next step? And that's incredibly important. That's what
Speaker 1: we've been hearing that our users want next from Fitbit.
Speaker 1: We'll tell us more about that, because clearly this is
Speaker 1: a response to the market. What did you specifically see,
Speaker 1: what did you specifically here from your previous products that
Speaker 1: sort of got you to this. Well, it's it's not
Speaker 1: so much from the market, but it's really from our customers.
Speaker 1: Because we we collect a lot of data from our users.
Speaker 1: We also see, you know, how well they're doing, you
Speaker 1: know how much weight they're losing, how much sleep that
Speaker 1: we're getting, And we felt that focusing more on the
Speaker 1: software and services aspect of health was really the next
Speaker 1: step in getting our users to become healthier. I think
Speaker 1: we had taken to the limit what we could do
Speaker 1: with just giving people metrics, and they really needed to
Speaker 1: understand what to do with that data. James, what I
Speaker 1: do wonder and I agree Jason, I talked about this
Speaker 1: a lot. I do think that the healthcare area, there
Speaker 1: is going to be a day where somebody every almost
Speaker 1: everybody has some kind of device tracking kind of their
Speaker 1: healthcare metrics. At this point, you are, though, competing with
Speaker 1: some really big players, Apple, Samsung among them. Um, you
Speaker 1: have a significant market share, they have a significant market share.
Speaker 1: How do you compete against those big players? First of all,
Speaker 1: we're the number two wearable brand in the world. People
Speaker 1: know the Fitbit brand as being really focused on health
Speaker 1: and fitness rather than a hundred other things as well,
Speaker 1: and so the way we design our products and services
Speaker 1: reflects that. So, for instance, our Harvard devices have a
Speaker 1: lot of battery life, ranging from five days to over
Speaker 1: seven days, and that allows us to do things like sleeptracking.
Speaker 1: You can wear devices seven and sleep is such an
Speaker 1: important part of your overall health. So for instance, in
Speaker 1: Versa two, which we just announced, uh, there's a few
Speaker 1: new sleep features that were launching, including sleep Score, which
Speaker 1: tells you with a simple number, how well you've slept
Speaker 1: throughout the night. We're also launching a feature called smart Wake,
Speaker 1: which tries to wake you up at the right moment
Speaker 1: in the morning. I love those kind of devices because
Speaker 1: it really does give you a better nights sleep. Yeah. Absolutely,
Speaker 1: we're trying to solve people's real problems, and I think
Speaker 1: if we stay focused on that, um, you know, the
Speaker 1: we are we are, But you know, first of all,
Speaker 1: we have to worry about our customers and make sure
Speaker 1: we're improving their health. And I think to that extent,
Speaker 1: if we developed products and services that do that, I
Speaker 1: think the competitive element in some way takes care of
Speaker 1: itself well. And tell us about your conversations with investors,
Speaker 1: because obviously it goes without saying you watch the stock
Speaker 1: price more closely than we do investors are skeptical they've
Speaker 1: driven the price down. Help us understand what they're saying,
Speaker 1: what you're saying back to them in terms of how
Speaker 1: this transformation and transition you know, may pretend better revenue,
Speaker 1: better profits in the future. Yeah, I think investors right
Speaker 1: now have a weight wait in seattitude, and you know,
Speaker 1: I think we we acknowledge that and understand it. And
Speaker 1: we had some challenges earlier, you know, being very upfront
Speaker 1: with the launch of our Versa l product that said,
Speaker 1: we learned a lot of lessons from that launch that
Speaker 1: we're going to carry forward um. But you know, we're
Speaker 1: continuing to execute on our transformation, and I think what
Speaker 1: investors UH have to look forward to is, you know,
Speaker 1: for instance, with the launch of Premium, that we are
Speaker 1: hitting important milestones. The launch of Premium is going to
Speaker 1: accelerate our transform shan into a business that has much
Speaker 1: more predictable revenue streams, and we're doing things that even
Speaker 1: accelerate that. So, for instance, we announced the deal with
Speaker 1: the Nation of Singapore that bundles together hardware and services.
Speaker 1: And from what I understand, you beat Apple to get that.
Speaker 1: Is that true? We can't talk about the competitive element.
Speaker 1: But you know, the government of Singapore is a very
Speaker 1: forward looking nation state, and you know, we're really happy
Speaker 1: to to work with them to try to improve the
Speaker 1: health of their citizens. And the next step as well
Speaker 1: is with the launch of Premium and Versa two. We're
Speaker 1: bundling together Versa two and Premium together at retail and
Speaker 1: we're trying to transform again the idea of Fitbit not
Speaker 1: just as a hardware company, but as a solutions company
Speaker 1: that includes both hardware ants off. So talk to us
Speaker 1: a little bit more about premium, because it does feel
Speaker 1: like we're at this moment where whether we're talking about
Speaker 1: streaming services, whether we're talking about other elements in our
Speaker 1: lives where people are a little more comfortable paying up
Speaker 1: for quality. Who's the market How big is it for
Speaker 1: that premium product? Yes, so we did a lot of
Speaker 1: market research before launching our pre m service. So the
Speaker 1: great thing is UM a lot of our users twenty
Speaker 1: seven million active users were willing to pay for service,
Speaker 1: and actually two thirds of them were already paying for
Speaker 1: some type of health service or app to help them
Speaker 1: get more active, eat better, see better, etcetera. So UM
Speaker 1: the launch of Premium at ten dollars a month or
Speaker 1: seventy nine dollars a year is actually a lot of
Speaker 1: value for users. Rather than paying ten dollars a month
Speaker 1: for three or four different apps. Uh, they can pay
Speaker 1: for one integrated service that's incredibly affordable. So what ultimately
Speaker 1: is the mix between services and hardware? Do you ultimately
Speaker 1: see that in terms of revenues and profitability that it's
Speaker 1: three quarters is coming from services. Uh, you know, we
Speaker 1: can't we can't talk to the mix right now, but
Speaker 1: we do expect for premium and other non device revenue
Speaker 1: to actually have a meaningful impact on our gross margins
Speaker 1: and we want to wrap to the increase the mix
Speaker 1: of our revenue that comes from premium over time. Can
Speaker 1: I Can I just follow? Because it is interesting about
Speaker 1: kind of what Wall streets per option is right now,
Speaker 1: about your company and and this kind of explosion that
Speaker 1: we're seeing in the fitness space. You among them. But
Speaker 1: it's interesting like City Group has said that your shares
Speaker 1: may be worth two dollars a year from now. They
Speaker 1: say that you lack a mass appeal smart watch with
Speaker 1: full two way texting functionalities such as an Apple Watch.
Speaker 1: What do you say to them? And this is one
Speaker 1: of the two animals that have a cell rating. There
Speaker 1: are folks, I think there's three buys, five holds, two cells.
Speaker 1: What do you say to the investment community that they're
Speaker 1: kind of missing about your picture and your story? Yeah. So,
Speaker 1: I think the first thing is that actually we've grown
Speaker 1: device shipments year over year. Even our fitness tracker business,
Speaker 1: which people thought was a stagnant category, we grew tracker
Speaker 1: unit shipments year over year. Versa is an incredibly best
Speaker 1: selling smart watch, not just in the U S so
Speaker 1: around the world. And we've grown or active user based
Speaker 1: steadily year over year. Uh, and it's sticky. You get
Speaker 1: a user and you yeah. So one of the stats
Speaker 1: is since the start of the company twelve years ago,
Speaker 1: thirty three of our users are still active using our devices.
Speaker 1: And if you think about it, versus a typical health
Speaker 1: and fitness product like you know, a treadmill or a
Speaker 1: gym membership, etcetera. You know that's measured in weeks of
Speaker 1: retention of users over twelve years are still with us.
Speaker 1: And I think that's incredibly sticky. And we have twenty
Speaker 1: seven million active users and that's an incredible foundation on
Speaker 1: top of which to launch a premium service. All right,
Speaker 1: So let's talk about in some ways the other end
Speaker 1: of that spectrum, the accessibility piece. Because we talked so
Speaker 1: much about sort of the affluent fitness market. You've talked
Speaker 1: about that with us before. Clearly the premium product is
Speaker 1: in part aimed at them, but pushing this down to
Speaker 1: a much broader population it's good for business, clearly, it's
Speaker 1: also kind of good for society. I think we would
Speaker 1: all agree. How do you do that? How do you
Speaker 1: make it access? Yeah? Absolutely, that's a that's a primary
Speaker 1: focus of the company. So, first of all, we try
Speaker 1: to make our devices as accessible as possible. And you know,
Speaker 1: first aspect of that is its cross platform. Our products
Speaker 1: work on both Android and iOS. We've driven down the
Speaker 1: price points of our devices or tracker products are incredibly
Speaker 1: affordable versus a full blown smart watch from some of
Speaker 1: our competitors. And through our health solutions business, we try
Speaker 1: to work with employers and health plans and needed nations,
Speaker 1: leading health plans from United and Humanity to either partially
Speaker 1: subsidize or fully subsidize our devices and software. And a
Speaker 1: great example of that is with United Healthcare. Uh, you know,
Speaker 1: for seniors, Fitbit devices are fully paid for benefit in
Speaker 1: forty two medicare advantaged plans in twenty seven states. So
Speaker 1: we are working very hard to make what we're doing
Speaker 1: not just uh, you know, something that's accessible to the
Speaker 1: well off, but to everyone. How many people access it
Speaker 1: in their health plans? Uh, you know, we don't break
Speaker 1: out that number, but it's it's growing, and health plan
Speaker 1: adoption is a key part of how we plan on
Speaker 1: driving our user base and again of making what we
Speaker 1: do accessible to a lot of people. Do you anticipate
Speaker 1: more contracts like you've got in Singapore other Asian nations
Speaker 1: kind of signing on, because what's interesting is we're seeing
Speaker 1: as people have moved up the economic scale right in
Speaker 1: terms of the type of food they're eating and so
Speaker 1: and so forth, we're seeing more health problems, whether it's
Speaker 1: diabetes and so on. So I'm curious if you see
Speaker 1: more contracts like what you've got in Singapore and other
Speaker 1: in other areas of the world well as As you
Speaker 1: clearly said, it's a global problem, and I think people, Yeah,
Speaker 1: people are trying, you know, they're beginning to realize that
Speaker 1: so one in three adults around the world have more
Speaker 1: than one serious chronic condition whether it's diabetes, hypertension, cardiac condition, sleep, bapania, etcetera.
Speaker 1: And we've got to find creative ways to combat this problem.
Speaker 1: You know, technology isn't the end all be all, but
Speaker 1: it plays an important role. But technology has to be
Speaker 1: incredibly affordable and accessible. Well, speaking of technology and fitness,
Speaker 1: we're all sort of captivated by Peloton, you know, releasing
Speaker 1: It's S one. It's clearly a big moment. It feels
Speaker 1: like in this intersection of technology and fit this what
Speaker 1: do you make of this moment? Where we are now?
Speaker 1: You know, we've sort of gone through this boutique fitness craze.
Speaker 1: Technology seems to be coming to the four in home
Speaker 1: more personalized. Where are we in sort of the evolution
Speaker 1: of our sort of broader fitness journey. I think we're
Speaker 1: right on the cusp of something that's new. I mean
Speaker 1: you saw that, you know, we want public. Three years
Speaker 1: ago Luvango just went public as another digital health company,
Speaker 1: Pelicons going public. So I think what this all says is,
Speaker 1: you know, we're at the cusp where technology, data, machine
Speaker 1: learning is going to enable new advances and health and
Speaker 1: fitness technology that again allow the quality of care, a
Speaker 1: high quality high level of quality of care to be
Speaker 1: accessible to a lot of people, and that's incredibly important. Well,
Speaker 1: and does it also maybe pre sage a moment where
Speaker 1: Wall Street and the investors sort of get a little
Speaker 1: bit more comfortable with the metrics that they can use
Speaker 1: me And it was interesting even reading Pelotons as one,
Speaker 1: you know, they're coming up with new ways to think
Speaker 1: about sure and about monthly usage and all these different
Speaker 1: things because part of the case, it seems, is that
Speaker 1: Wall Street just doesn't fully understand doesn't have the right
Speaker 1: models to to fully value fitness company. And that's actually
Speaker 1: one of the challenges for us as well. And I
Speaker 1: think we have a double challenge where we have an
Speaker 1: enterprise business coupled together with a consumer business. So I
Speaker 1: think one of the challenges and opportunities for us is
Speaker 1: to help investors understand the opportunity in our business. What
Speaker 1: I also do wonder and I feel like you guys
Speaker 1: are going at it um in terms of, you know,
Speaker 1: providing accessibility, because I do think for a long time,
Speaker 1: memberships to clubs and so on and so forth was
Speaker 1: really for wealthier individuals. Um, how does making it more
Speaker 1: accessible kind of change the market size? That's out there absolutely.
Speaker 1: So the way we think about it is who you are,
Speaker 1: where you live, how much you make shouldn't dictate the
Speaker 1: quality of care that you receive. So through technology, the
Speaker 1: promise of remote care, remote monitoring, I think this is
Speaker 1: where you know, from a business perspective, the addressable market
Speaker 1: become is much much larger, and at the same time,
Speaker 1: we're helping so many more people. So that's what's exciting
Speaker 1: to me. And when you look at the universe of
Speaker 1: companies that are out there, are we headed for, especially
Speaker 1: as the market gets bigger, an era of another rafted
Speaker 1: startups coming? Are we looking at an era of consolidation?
Speaker 1: Like what's going to happen next? Do you think, as
Speaker 1: this market materitan, is there a company out there that
Speaker 1: you'd be interested in working with more closely? Uh? You know,
Speaker 1: I think the great thing is right now if you
Speaker 1: look at the whole ecosystem of health apps and services
Speaker 1: and companies, there's a lot of innovation going on and
Speaker 1: then there's a lot of opportunities for partnership and you know,
Speaker 1: for for me, I've been at this for twelve years
Speaker 1: and and you know, we're a very mission driven company.
Speaker 1: So it's just very exciting for us overall to see
Speaker 1: this whole area explode well, and I do wonder about that.
Speaker 1: I was thinking about that. You know, twelve years in,
Speaker 1: you're a very young guy, but you're sort of an
Speaker 1: old man and this isn't in some ways, maybe maybe
Speaker 1: being at this businesses aged you more than you but
Speaker 1: you've seen a lot um. I mean, what's the biggest
Speaker 1: change over over that twelve years, you know, both running
Speaker 1: this company and also sort of seeing the evolution of
Speaker 1: this market. Yeah. I think one of the biggest changes
Speaker 1: is when we first started out, I think people were
Speaker 1: just skeptical about the very concept. You know, was it
Speaker 1: a fad? Would everyone use this? And uh, you know
Speaker 1: it's from the early, very early stage with venture investors
Speaker 1: as well. Uh, And one of the challenges we had was,
Speaker 1: you know, again, so actually around this concept of accessibility.
Speaker 1: A lot of the early venture investors were very serious
Speaker 1: cyclists try athletes, so they thought, you know, what's the
Speaker 1: market for a simpler device that you know, is usable
Speaker 1: by by more people. They didn't quite get it. And
Speaker 1: and now it's clear that this whole area is not
Speaker 1: a fat That's the biggest change that I've seen that's
Speaker 1: I think really fascinating. Do do investors get it? Does
Speaker 1: Wall Street get that part of it that it's not
Speaker 1: just kind of a cool thing that all right, I
Speaker 1: want to, you know, check in with it, but it's
Speaker 1: become a much more um thing that maybe becomes a
Speaker 1: way of our living. I'm not sure they're there yet,
Speaker 1: but the way I see it is if wearing a
Speaker 1: device and being signed up for service helps you detect
Speaker 1: diagnosed diseases at a much earlier state, help you manage
Speaker 1: those conditions, and at some points literally save your life,
Speaker 1: Like you'd be crazy not to wear one of these devices.
Speaker 1: I do wonder though, just to play Devil's advocate for
Speaker 1: a second, we're also at this moment where we're maybe
Speaker 1: some of us a little skeptical about technology and all
Speaker 1: the ways that it impacts our life or invades our life,
Speaker 1: whether it's privacy, whether it's just our reliance on our devices,
Speaker 1: you know, mostly like a smartphone or something like that.
Speaker 1: How do you sort of kind of thread that needle
Speaker 1: of we want to enable you know, good technology and
Speaker 1: data collection and things like that, but ultimately you're about
Speaker 1: an active way of life. I mean that that's a
Speaker 1: that's a maybe tough road to to walk at some point. Well,
Speaker 1: for us, it's actually been easy from the data privacy
Speaker 1: aspect because our business model isn't predicated on advertising and
Speaker 1: selling data at the third party. So actually, from the
Speaker 1: very beginning of the company, we've had a very strict
Speaker 1: privacy policy where we've told our users we don't sell
Speaker 1: your data at the third parties, we only share your
Speaker 1: data with explicit opt in consent um and so, and
Speaker 1: we don't work with companies on our health solutions business
Speaker 1: that don't abscribe to our bill of rights that we've created,
Speaker 1: which include things like you can't have punitive measures uh
Speaker 1: in place for people who don't participate or who don't
Speaker 1: hit certain goals because at some point, you know that
Speaker 1: that could have been a trend. Uh. So, I think
Speaker 1: we're very aligned with with our users. Again, we're a
Speaker 1: very mission focused company. We're a brand that has stood
Speaker 1: for you, helping you, uh, you know, get more healthy
Speaker 1: and get more fit, and you know, I think our
Speaker 1: our users are very aligned without a very passionate about that.
Speaker 1: Speaking of alignment, I am curious about the medical community
Speaker 1: because I do feel like you have to have them
Speaker 1: on board to say, you know what, this is a
Speaker 1: useful device I'm gonna recommend to my patients. Where are
Speaker 1: we in that? I think, honestly, we're in the in
Speaker 1: the early stages. I think there's a lot of forward
Speaker 1: looking doctors who have embraced digital technology and remote monitoring
Speaker 1: technology into the way they care for their patients. I
Speaker 1: think there's a lot more room to to go from there.
Speaker 1: One of the things that we're launching with our premium
Speaker 1: service is this health report, where we've actually worked with
Speaker 1: leading physicians to create a summarized view of the data
Speaker 1: that we're collecting off our devices. And we hope that report,
Speaker 1: because it's been constructed with the help of doctors, creates
Speaker 1: a very productive dialogue between patients and physicians in the
Speaker 1: context of an office visit. So you talked about a
Speaker 1: company in transition, transformation, whatever word you choose. Where are
Speaker 1: we along that sort of timeline and when is it complete? Uh?
Speaker 1: Sooner rather than later, I think, you know, the premium
Speaker 1: announcement is one that we've eagerly anticipated intern really, and
Speaker 1: I think a lot of outsiders, including investors, have waited
Speaker 1: for as well. You know, it's a very visible and
Speaker 1: tangible step in us saying, hey, look, we're not just
Speaker 1: a devices company anymore. We're a solutions company that includes
Speaker 1: services and hardware, and we're shifting our revenue streams from
Speaker 1: episodic device sales to more recurring and predictable revenue streams. James,
Speaker 1: how much, though, are you worried potentially about whether we
Speaker 1: go into recession? How does that impact your business? Is
Speaker 1: this considered something that's not a necessity in harder economic times?
Speaker 1: I'm just curious about that. You know. I can't speak
Speaker 1: about macroeconomic issues, but I think you've You've been around
Speaker 1: with your business through the crisis and stuff, so you won't.
Speaker 1: I think we managed successfully through that For us though.
Speaker 1: I think health, Um, it's it's not the discretionary thing.
Speaker 1: It's I think something that's really important in people's lives.
Speaker 1: Do you think that? Jason thinks that. I definitely think that,
Speaker 1: But does it Does the world at large kind of
Speaker 1: think that at this point? Um? I think given the
Speaker 1: just awareness and explosion and health and fitness apps and
Speaker 1: services in the amount of money that consumers are spending
Speaker 1: even today, I think it's something that's here to stay.
Speaker 1: That was James Park Fitbit CEO. He's also a chairman, president,
Speaker 1: co founder. But you know, as you mentioned, the company
Speaker 1: is definitely in a transition. This space is getting increasingly
Speaker 1: crowded and this company is trying to make its mark.
Speaker 1: Wall Street not necessarily all in on it, but they
Speaker 1: did have some news this week, and we'll see how
Speaker 1: it plays out well. And what I liked about him
Speaker 1: is he's all in for sure. I mean even you know,
Speaker 1: what we saw behind the scenes was after we were
Speaker 1: done taping, he actually fixed my fitbit for me, and
Speaker 1: I like that. I like when it's healthline, I know,
Speaker 1: exactly genius bar to use the nomenclature of one of
Speaker 1: their big competitors, but you know, seeing him sort of
Speaker 1: in the mix there, I mean, he's having to make
Speaker 1: this case to Wall Street, which so far remains skeptical. Yeah, exactly.
Speaker 1: I will say though, that emphasis on healthcare, I do
Speaker 1: feel like that's the next big territory to be untapped,
Speaker 1: and they're definitely playing into it. You've been listening to
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