It’s January, and I’m feeling philosophical. Like many people revolving around the fitness industry, I’m trying to imagine what the rest of 2023 will look like for the fitness industry, especially in the at-home and digital space. The whole industry is still in flux - from high-end boutiques to the big digital brands to influencers - the battle for wallet-share is on, and fitness consumers are continuing to evolve given all the options out there.
This is the first in a two part series of blog articles about watch parties, and how they may change at-home fitness classes from local studios. This first part is really setting the scene on whether there’s demand and what the other alternatives are for at-home / virtual fitness. Part 2 that we’ll release soon focused on how watch parties - how brands like Orangetheory and F45 are using them today, how you could use them, and the features that Tribe is adding to its products to make watch parties rock.
Demand and Options
Do people still want to work out at home? I get asked this sometimes by investors, now that there has been a pendulum swing back to in-person. But recent surveys show that there is still an appetite, e.g. Momentive in September last year found that 57% of US adults still exercise at home at least weekly, over double the number who visit gyms and boutiques at least weekly. At the same time, elite boutique studios in financial districts struggle to fill classes, and as The New York Times reported recently, high profile commercial office space will be under pressure for years. People are spending a lot more time in their homes now.
What options do consumers have today for at-home fitness:
1. Free Fitness: There is a ton of free content out there, on YouTube and other platforms. The BBC estimated that there were over 30 million fitness videos on YouTube in 2017 - before Covid! The quality of some of this content and that it’s free is a real challenge to paid content providers. Brands like FitOn are even offering a content experience that feels like it should be behind a paywall for free. Netflix also just announced that it’s launching fitness content from Nike as part of its subscription, and although Netflix is paid, most US consumers have it.
2. Subscription Fitness: There are a lot of fitness brands offering on-demand video subscriptions - like Neou, Beachbody, Les Mills, various influencers, etc. Local fitness brands like Xponential, Barre3, Title Boxing and many others have jumped on this too - with prices from $5 per month to $30+ per month. I don’t personally understand how paid access to video libraries has a workable business model longterm given all the free content, and some of the pricing seems unsustainably ambitious.
3. Connected Fitness: Most of these brands grew rapidly in the heavily over-funded period of the last few years due to Covid - Peloton, Hydrow, Mirror, Tonal, Tempo, Echelon and many more. I feel like the model here has been to lock the consumer into a hardware purchase and then hope they stay subscribed forever irrespective of how much they use the hardware. But the cost of acquiring customers for connected fitness is now massive, like $1,000 per customer from conversations I’ve had with vendors. And there’s so much Covid era hardware floating around on Facebook Marketplace, which will take years to wash through the system. The huge cost of acquiring connected fitness customers would say that many consumers are no longer excited about at-home hardware + videos.
4. Personal Training: There have been digital training personal marketplaces and software solutions like IndiFit, TalentHack, Moxie, Interval, etc … but most have given up. Churn of both members and coaches have been high, and the 100% remote at-home experience of personal training just isn’t the same as the relationships that people can build with personal trainers face to face. Recess and Arketa are still going, but both have pivoted into offering SaaS for studios as well as individual trainers, trying to take on the existing gym management software ecosystem that’s dominated by Mindbody. There are some premium at-home personal training solutions like Future and Forme that are blending technology into the model, but personally I’m pessimistic on whether enough consumers will continue to pay the high price for that experience.
5. Local Omnichannel: Local studios were dragged into digital by Covid, most jumping on Zoom, and I think most are also still trying to figure out whether there’s a sustainable digital model for them. Surveys show that members want at-home fitness options, e.g. Momentive in September last year found that 72% of weekly gym goers also exercise at home on a weekly basis. But is this local experience compelling enough? Does it feel premium or does it feel like amateur hour? And are the unit economics sustainable (can you make a profit)?
Side note - I have heard some people use “omnichannel” to mean consumers picking whichever fitness option they feel like given the context. So Apple Fitness+ or Peloton at home, maybe some Zwift thrown in there too, trips to a box gym for weight training, Nike Run Club and/or Strava for outdoor running as well as some Barry’s classes. It’s for sure true that some consumers like to mix and match, and it works best for people who are self-motivated, but many people find it easier to stay motivated to workout in a social context with real world friends. Omnichannel in e-commerce is about correlating a consumer’s experience in store with online, versus multi-channel (where in store and online are totally separate), and at Tribe, that’s how we use the term “omnichannel”.
At Tribe we do believe that local fitness gyms and boutique studios can bring a unique and differentiated offering to at-home fitness, building on the culture, relationships and community that get built face to face in the studio. As we’ve said many times at Tribe, for a large proportion of consumers, working out is hard (unlike watching Netflix), and anything that provides motivation and accountability can help. As cited by McKinsey, 50% of US adults in one survey felt that their at-home workouts were not intense enough, sporadic and demotivating.
But the “price to value” equation has to work for consumers, and the service has to make money for gym and studio owners.
Today, I don’t think at-home / digital is really working at a local level - I don’t believe that any local fitness brands, studios, franchises etc are like, “oh yeah, we’re rocking it at digital!”
There are a lot of challenges:
· Clear Objectives: As a studio owner, have you set your goal for at-home / digital? Is it to attract new customers for in-studio? To service members with new options? To find new revenue streams? Often these potential objectives are mixed together without clear KPIs or metrics and just a sense of, “I feel like I should do something, but what I’m doing isn’t working.”
· Premium Experience: Boutique in person is so much about the premium experience - interior design, the energy, the music, the tribal culture. But do Zoom classes feel premium? Honestly, no. Peloton and Apple Fitness+ do feel premium, and it’s a mix of coach talent, production quality and the capabilities of the technology platform they’ve built.
· Studio Cost: Building out a space, buying cameras, lights and other equipment - it adds up. If you want to have a TV crew for shooting the content, the cost per produced hour rockets up even higher to numbers that don’t work in live classes unless you have the scale of Peloton. Endorphinz, a boutique production service focused on fitness, has indicated ranges of $250 to $2,000 per produced hour - very few brick and mortar brands have that budget.
· Operating Cost: Doing Zoom classes for 5 people is like burning money and can start a digital death spiral. Putting up the prices to $20+ per class means even less people are willing to pay, so the average number of participants per class drops, and you lose even more money. If you do a few classes each week as a “perk” that’s part of an unlimited membership package, I can see it ticking a box - like have a swimming pool that hardly anyone actually uses. But to me, just having digital to have it doesn’t feel like success.
· Coach Viability: As it turns out, many fitness coaches can do a great job face to face in studio classes, but struggle to transition to TV personalities in front of cameras. It’s hard - especially if you can’t see the audience very well and have no metrics or things to high five about.
· Hybrid Struggles: One of the answers I’ve put forwards in the past to managing operating costs down is doing hybrid classes, where a single class has both in-person and at-home participants. Technology can help with this, and some coaches may be able to pull it off, but for the majority of coaches I think it’s just too hard to do both well simultaneously. In-person participants find the coach distracted, and at-home participants feel like they’re watching Big Brother - Fitness Edition. Peloton coaches kind of pull it off, but the in-studio participants have the buzz of being a TV audience in their favorite TV show.
So is it time to be pragmatic about swim lanes and where your strengths lie, or is it a missed opportunity? Honestly, I don’t think anyone knows for sure yet. And personally, I believe that stating a potential future with absolute conviction is just a quick path to losing both credibility and integrity. Realty check - we’re all still figuring this out!
Quit or Outsource?
In my philosophical mindset, I feel like a lot of studios are going through the motions and slowly giving up on digital, surrendering it to Apple Fitness+, FitOn, YouTube and other fitness experiences that members can go and find. These studios quiet quit digital in steps - the digital classes thin out and disappear, then the option to buy them disappears, the existing on-demand catalogue becomes free with in-person membership, and eventually someone remembers to update the website FAQs to take digital down.
Some brands, like Life Time, have doubled down on outsourcing digital, bundling Apple Fitness+ for all their members. Chatting with a friend who was at a fitness conference recently, he said that quite a few brands are thinking to just get a subscription to Les Mills for their members to use at home, kind of like the swimming pool “it’s there if you want it” thing. I think the challenges with just using say Les Mills are that:
1. It’s a totally separate experience than your own app - it’s via the Les Mills app or website. If you are creating any digital content at all, the Les Mills experience is completely separate, so it’s a total replacement not augmentation.
2. The content is all in Les Mills brand - it's not white labeled content via your own brand as the studio owner. FitScope is an example of a more white-labeled content provider - they create content for Nautilus and others.
3. Les Mills in particular actively markets their brand, trying to push certified coaches at other studios as well as their own direct to consumer subscription services. I don't get why you would want that in a boutique studio unless you’re outsourcing "brand" - perhaps it makes more sense for a big box gym that’s just thinking about real estate with equipment access.
4. To me, Les Mills content feels like it should be free on YouTube - in fact Les Mills has a YouTube channel with some free full classes. I also personally find a lot of the Les Mills stuff looks more like a rock concert and less like a fitness class, but maybe that’s just me.
5. There's no local community - typically there's zero community, but even if there were some it would be class wide (like Peloton) not revolving around the community you want to build in your own studio.
6. There's no tie into your challenges / programs / streaks / gamification things in your own studio - or social context around that. It’s all separate.
So is there a door number 3? And what are brands trying? Yes - several like Orangetheory and F45 have been trying watch parties, and that will be the focus for the second part of this two part blog series, coming soon!