As BFS Co-Founder, lead investor and first sponsor I have three intersections with the fitness community. First, I’m a part owner in a fitness studio in Manhattan. The second is through BFS, where we have valuable connections in the fitness community and are able to help support it in a variety of ways. The third is through a tech company I started called FitGrid, which is the only community engagement CRM in the industry.
At FitGrid, we believe that fitness is all about people, particularly but not exclusively group fitness. When you go into a class, you connect with the other people in it —the clients, the instructor, the front desk staff, all motivating you to do more and achieve your goals. These connections make it more likely for you to come back and for you to hit your goals. It’s an acquisition and retention play, and previously no one had built software that actually leverages your community on behalf of the studio, the studio owners and managers. We’re working to enhance their member experience.
I think the Peloton product is very well done. It’s slick, well integrated and the media and cinematography surrounding it is impressive. The instructors are great, as is having the options in class times and music stylings. In general, I think it’s great, and this is coming from someone who doesn’t consider themselves a ‘spin person’. They obviously took off like a rocket ship during COVID, when all studios were closed down. I like Peloton’s perspective on the instructors being the back bone of what they do–the star that they put in the front of things.
The conversations they’ve had about acquisition, sales and the rest of that are challenges that they brought on themselves. None of those I think were necessary or needed to happen, but I would call the confluence of events self-made errors. All of that pressure resulted in the management needing to be changed, pressured by the investors.
As victims of their own success there were factors that contributed to it all. First, they saw the increase in demand and weren’t able to recognize it as the ‘sugar rush’ it really was. I compare it to Zoom, where it was maybe more obvious, where the 300 million people that were using it would say ‘We’re using Zoom until we can go back to being in person’. I feel something similar happened, where people got their Peloton bike, but only while they couldn’t go in person. I think there was a bit of a misunderstanding of the level of demand that was actually out there and not preparing enough for it, as I said it was a ‘sugar rush’.
There was also a lot of bad PR–like the mortally injured people, that definitely did not help. They didn’t seem to have a clear PR strategy to help in those events. Culminating the PR fiasco was the Waldorf Christmas Party, and that they recently bought a house. Investor’s likely understood this to mean management wasn’t entirely focused on business when they needed them to be.
As far as what this may mean to fitness business owners, I really don’t think this will affect them at all. Peloton was a competitor pulling people away from them during COVID, but I’ve noticed the bounce back of people getting back into the studios and studio owners realizing that virtual fitness can complimentary to their services; an addition rather than the replacement of studios. What studio owners can learn from what Peloton did, is that technology can be a major component if you continue to invest in it.
Peloton’s relationship with their instructors has shown us an evolution of the role of the instructor in the industry. With Peloton they are considered rockstars and the backbone of the business, which has not always been the case within group fitness.
The number of instructors that were laid off was very small if any, though it does bring up the dynamic between ‘rockstar’ instructors and studio owners. There’s a long strife, with the instructor wanting to earn more but the studio owner not being able to pay them as much to keep their business profitable. This dynamic has existed even before COVID, and a lot of instructors started building their own brands and businesses after layoffs started happening during the pandemic.
The digital landscape allows for them to do so in ways they weren’t able to before. I do find many instructors don’t really love the business side of it, they want to be practitioners of their art. This shift of power towards the instructors might mean studio owners have to consider ‘non-compete agreements’ and such, because now we realize how influential instructors can be.
Looking into the past and recently announced new CEO of Peloton, there are a couple of topics to think about. John Foley was definitely not focusing on the business and the losses they were having, but on the lifestyle he wanted to portray. This was obvious to their investors. He put out a B.H.A.G (Big Hairy Audatious Goal), which is great, but wasn’t able to see the signs past that. Peloton really believed that demand would continue to soar. They assumed that people wouldn’t want to go back to the studios, but people eventually started to exercise outside of their homes. Also, at the end of the day not everybody likes spin. Some people did spin because that was what they could fit in their homes, but when there was a chance to change it up, they did. So, they drank the Kool-Aid so hard that they missed the forecast.
Now, Barry McCarthy has to start with the layoffs unfortunately, dropping 30% of their staff looks right and unfortunately has to be done all at once. Harder still, is the impact this has on company morale–it’s a disaster. The effects we see in stock pricing is because they weren’t good at forecasting, didn’t have a strategy for the bad press around injuries and mortalities, and unruly spending. Employee morale must be rock bottom. Stability and growth are the key to turn that back around.