Peloton is increasing its subscription fees but reducing the cost of its Bikes and other equipment.

• For the first time, Peloton is increasing its monthly fee for on-demand fitness content.
• In an effort to attract new customers, Barry McCarthy, the CEO of the connected fitness equipment maker, is lowering the prices of its Bike, Bike+, and Tread machines.
• As Peloton tries to recover from a recent drop in its stock price, the company is making strategic moves.
• Peloton has been viewed as an opportunity to cut hardware costs by McCarthy, a former Netflix and Spotify executive.

For the first time, the monthly fee for on-demand fitness content is being introduced by the company, while simultaneously reducing the prices of Bike, Bike+, and Tread machines to attract new customers under the leadership of Chief Executive Barry McCarthy.

Peloton is set to announce sweeping changes internally on Thursday, as McCarthy, who has been leading the company for two months, tries to reverse a recent decline in its share price.

Initially, Peloton's stock experienced a surge in trading before it was halted at 11 a.m. due to volatility. The stock ended the day with a 4.6% decline.

Peloton has been viewed as an opportunity by McCarthy, a former executive, to cut hardware costs, which would lower the barrier to entry for consumers and enable the company to shift its focus to increasing monthly recurring revenues.

A company spokesman informed CNBC that the pricing changes being announced today are in line with CEO Barry McCarthy's plan to expand the Peloton community.

From June 1st, the cost of Peloton's all-access subscription plan in the US will increase to $44 per month from $39, while in Canada it will rise to $55 from $49. The pricing for international members will remain the same, and the cost of a digital-only membership will still be $12.99 a month.

Peloton announced that it will be increasing its prices in a blog post shared with CNBC. The company stated that producing high-quality content and maintaining an engaging platform comes with a cost, and the price hike will enable them to continue providing their services to users.

Starting from Thursday at 6 p.m. ET, Peloton will reduce the prices of its connected fitness bikes and treadmills to make them more accessible to a broader audience and increase its market share following a surge in demand caused by the pandemic.

• The cost of its Bike will decrease to $1,445 from $1,745, including a $250 shipping and set-up fee.
• The Bike+ will drop to $1,995 from $2,495.
• The Tread machine will be sold for $2,695, a decrease from its original price of $2,845. The Tread cost includes a $350 shipping and set-up fee.

In select U.S. markets, Peloton is currently testing a rental option where users can pay a monthly fee between $60 to $100 for a rented Bike and access to its workout content library. The company has recently expanded the test and added the Bike+ as another rental option.

Peloton has more than 6.6 million total members, including those who only pay for its workout classes, as of Dec. 31, with 2.77 million connected fitness subscribers.

The company has a history of making its hardware more affordable, especially with the push of the subscription model. Recently, it released its new strength product, Peloton Guide, for $295, which is $200 less than what Peloton had previously stated the device, bundled with a heart rate armband, would retail for.

Peloton under pressure

Peloton's stock has been trading below its initial public offering price of $29 since the day McCarthy was announced as CEO, resulting in a 35% decline in share value.

In early February, John Foley, the founder of Peloton, stepped down as CEO and was replaced by McCarthy, who is now serving as executive chairman.

Peloton announced plans to cut approximately 2,800 jobs and eliminate hundreds of thousands of dollars in annual expenses as part of a significant restructuring and operational reset.

There are concerns that McCarthy, despite stating that he continues to work closely with Foley, is not doing enough to achieve profitability.

Activist Blackwells Capital restated its demand for Peloton to explore a sale of the company, stating in a presentation that shareholders are now in a worse financial position than before McCarthy assumed leadership. Peloton declined to respond.

Peloton has a loyal base of subscribers who pay for its workout equipment and monthly content. Its average net monthly connected fitness churn in the latest quarter was 0.79%. Lower churn rate is good news for Peloton.

Peloton's connected fitness subscribers were averaging 15.5 workouts per month as of December 31st.

To provide more value to its members, Peloton is consistently introducing new class options, including yoga, meditation, and kickboxing.