I suspect a lot of the confusion here is the necessity to start the workout app to get exercise minutes to log correctly. If you don't, it's quite possible, even probable, to hit 25k steps and get zero minutes.
The solution is to actively monitor HR, pace and movement full time. It's silly to need to start and stop an application - a brisk walk is still a brisk walk regardless. But that requires battery capacity that doesn't exist in this first generation watch.
Maybe next year.
In my original post I stated that I'm using the workout app and not getting exercise counted.
Also to the people essentially saying "walk faster", exercise is different to different people in different situations. A friend of mine lost 100lbs just by walking (not very fast) 10,000 steps a day for somewhere between 6 months and a year. By the way the apple watch tracks "exercise", he wouldn't have logged a single minute, though he lost 100lbs.... Also, like the guy a few posts up said, he did a hike and it didn't count, so something is clearly off here. (And his Fitbit counted all those steps and considered them exercise.)
As far as I'm concerned, if you're using the workout app, it should be logging "exercise". This isn't about cheating or winning or any nonsense like that, this is about accurately tracking the work you're putting in.
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So far I'd definitely say it's a good motivator. I hadn't used my indoor bike in a few weeks, maybe a couple of months. But now that I can use this to get "credit" for riding it and that little green ring grows, it's kind of like I get rewarded for it. So I've done five minutes last night and 10 minutes tonight. I thought a short walk I took at work would count as exercise, but I didn't turn on the activity app for a walk because I didn't know it had a walk thing and I just forgot. That didn't count as exercise, but I believe walking from my car back to my desk did. Strange.
I made a suggestion on another thread about Apple possibly really rewarding people. I know fraud would be a struggle, but figure out something where if you fill in all three rings in a day you get like 1 or 2 cents credit on your Apple account. If they wanted to offer a larger credit, it could possibly become a selling point or say that you can make the watch pay for itself over time.
Regarding the walk you took at work: the problem is that even if you had opened the workout app and selected a walk, it wouldn't count it as exercise unless you were walking fast enough. That's the issue I have and what I feel needs to change.
I mean, what about a 70 year old with bad legs, he walks slowly but he takes hour long walks to stay healthy? Is he NOT exercising? (Apparently not to some of the people in this thread.)