Apple is challenging Peloton in the race to dominate the future of fitness

• Apple unveiled a new fitness service called Apple Fitness Plus on Tuesday.
• The service, like Peloton, offers digital fitness classes led by charismatic trainers that can be viewed on your phone, iPad, or Apple TV.
• It's unclear if Apple will be able to challenge Peloton's appeal, considering Peloton has built a fervent, cult-like following and community.
• Regardless, Apple Fitness Plus is an important part of Apple's long-term plan for the Apple Watch, enabling it to keep users hooked and expand the watch's appeal beyond hardware updates.

Health has been one of Apple's major priorities for years, ever since the original Apple Watch debuted in 2015. But the company took a major leap forward in its health ambitions with the introduction of two new Apple Watches and a digital fitness service on Tuesday.

Taken together, the announcements show that Apple has its sights set on new audiences — particularly one that Peloton has already been targeting. It also says a lot about Apple's strategy for the Apple Watch, namely that the company is already starting to lean into the services-heavy approach it's taken with the iPhone in recent years.

One of the biggest announcements at Apple's September 15 event was the unveiling of Apple Fitness Plus, a subscription service that provides access to a range of recorded workouts from top trainers around the world. The app features a custom engine for recommending workouts based on your current routines and integrates with the Apple Watch by showing your activity rings on screen.

Like Peloton's classes, Apple Fitness Plus courses are led by vibrant, energetic trainers and cover a variety of workout types, from cycling to running and yoga among others.

It's a clear effort to dip into Peloton's market, which encompasses a community of 1.4 million members and spiked earlier this year as the coronavirus pandemic forced gyms across the country to close. Apple Fitness Plus, however, was in development long before the COVID-19 outbreak.

The appeal of Peloton compared to Apple

While Peloton may be best known for its high-end fitness bicycles and treadmills, which start at $1,895 and $4,295 respectively, the company considers itself a media company — highlighting how crucial its interactive classes are to its success. Peloton's charismatic, motivational trainers and addictive classes are at the heart of its appeal, elevating it to cult-like status among fitness enthusiasts.

Apple does offer one important advantage over Peloton, however: it's cheaper. A subscription to Apple Fitness Plus will cost $9.99 per month when it launches later this year, compared to Peloton's $39-per-month subscription.

And Apple's service isn't associated with hardware that costs thousands of dollars (although it's certainly possible to do a Peloton workout with non-Peloton equipment). Apple Fitness Plus workouts can be done on any equipment, and many can be done without any gear at all. But it does, of course, require an Apple Watch.

Still, a big part of what makes Peloton so popular is the community and social element behind it. Peloton's leaderboard, the ability to take classes with the people you follow on Peloton, and give virtual high fives are a big part of the Peloton experience.

It's also about what happens when you're not on the bike; Peloton has cultivated an online community that makes it feel more like a lifestyle rather than a brand. The official Peloton members Facebook group has more than 340,000 members, but there are plenty of niche groups created by users that cater to everyone from newcomers to runners and specific "tribes."

It's that combined with the convenience of working out from home, the flexible schedule, and the quality of the classes and trainers.

Based on what we've seen from Apple Fitness Plus so far, it seems like Apple has checked at least some of those boxes, particularly when it comes to the flexibility, convenience, and quality of the programming. It's less clear whether Apple will be able to generate such a fervent following with its own fitness app.

Apple's move to dip into Peloton's market comes after the high-end fitness bike maker has been called the "Apple of fitness" in the past. The company also drew inspiration from Apple's focus on user experience.

"We did talk about Apple a lot early on, and we talk about Netflix and Amazon," Tom Cortese, Peloton's chief operating officer and one of its co-founders, told CNBC. "When you think about these game-changer companies who have this focus on user experience, that is where we looked for inspiration."

Why Apple Fitness Plus is key for the Apple Watch

A service like Apple Fitness Plus could be crucial for the Apple Watch's long term success. It's an opportunity to keep current Apple Watch owners hooked into its ecosystem of services, much like it has done with the iPhone by launching services like Apple Music.

If users become accustomed to taking Apple's workout classes, it's takes even more work to convince them to switch to a rival like Fitbit or Samsung. That's especially true now that Apple is making the Apple Watch more accessible with the cheaper Apple Watch SE, starting at $279.

If there's anything Apple has seemingly learned in recent years, it's that hardware sales alone aren't enough to drive a product's long-term growth. It saw that firsthand with the iPhone, which went through multiple quarterly sales slumps in recent years.

Now, with Apple Fitness Plus, we're getting our first look at how Apple plans to sustain interest in the Apple Watch over the long term — perhaps even years from now when new Apple Watch models may not be as exciting as they are today.