In the first half of 2020 a new generation of fitness coach tools was born or greatly accelerated, mostly with non-fitness founders, several with high profile investors. Some focused on enabling coaches to run their own virtual coaching businesses, (e.g. Talent Hack, Interval, IndiFit, and Sutra / Arketa), others focused on creating marketplaces for coaches to lead virtual classes (e.g. Moxie, Salut and Recess). The theory was that the age of the fitness creator had arrived, no-one was going back into the boutique studios, and these studios were ripe for disintermediation (coaches going direct to end users in online classes, cutting the studios out of the equation).
Most of these startups have now shut down or greatly cut back in the last 90 days, and the founders have moved on into other sectors. Why? To figure this out, I spoke to the founders of several of these businesses, and asked them why they ultimately gave up. What follows is a fusion of the comments they made with some structuring and commentary from me.
I feel like I should give a health warning on this article - it isn’t one of your typical “Everything is awesome when you buy my product” vendor blog articles like the song from the Lego Movie. Having now finished writing and doing edits, this article may across as a bit depressing and perhaps even macabre, but I strongly believe we can learn from things that don’t work out, even if they seemed perfectly sensible at inception.
Virtual Coach Business Challenges
These are challenges for the whole idea of individual coaches having virtual businesses, irrespective of the tools that the coaches try to use.
1. Hard Work, Not Entertainment
Working out is hard, watching Netflix is easy. When people go to Barry’s, Orangetheory, Soulcycle etc, part of what they are doing is outsourcing motivation to keep pushing harder in workouts. Motivation comes from the coach, from the other people they know who show up to that class, from the special place and vibe at the studio, from the pounding music, etc. They pull you through the pain.
Most of that is missing when doing a class with a coach and a few other people you don’t really know, and it feels like doing a Zoom meeting. This means the perception of value can be way less than an in-studio class.
2. Free Content
There’s so much free content out there. Whether on Instagram, YouTube, Facebook or any of the other platforms, there are so many fitness Video On Demand options. Heck, FitOn is entirely focused on free fitness videos (with premium buy ups), and Amazon Prime also has tons of fitness content included in the subscription if you know where to look. I remember when starting Tribe that someone said to me “the last thing the world needs is more fitness videos”.
3. No Community
Most people get to know each other by spending time together physically in the same space - talking, body language, sweating together in the case of fitness. In pure virtual classes, that can often be missing.
The pure digital fitness offerings like Peloton and Mirror try to make up for the lack of true community with metrics, gamification, hardware lock-in and celebrity coach worship - though expect to see them trying to innovate in community (the new CEO of Peloton said recently that it was his #1 product roadmap priority). But it remains to be seen whether most of those Peloton bikes end up becoming coat racks or bouncing around Facebook marketplace. I just bought a barely used (15 rides) Peloton Bike+ this weekend for $1000 so I’d have something to peddle on during internal Zoom meetings - got to try to get some movement in when working from home limits my steps to three trips to the refrigerator / kitchen each day 😊 .
Studios have a leg up here - they have physical locations where people can go and take classes together. “Omnichannel” in fitness is the equivalent of “partial working from home” - some days you get into the studio for live classes, other days you do a workout from home (but still with the coaches, people, metrics and gamification you know and appreciate).
4. Production Quality
It’s really hard to monetize simple video libraries now, especially if they look like they were shot in someone’s kitchen. The same is true of Zoom classes - the experience is just way less than being in a physical studio, but it typically still locks up a coach’s time, just with a smaller audience who are each paying less. Having a single camera through a whole class is kind of boring, and it looks amateur compared to what’s available free online. Renting a TV crew isn’t an option as it would destroy all chance of making money at it, and the patience of a friend or partner for playing the TV crew role only stretches so far.
This is actually a key difference when compared to other creator platforms like Twitch for video gaming. With Twitch, the primary content is that ultra high-quality video game that took an army of engineers years to create in a games studio - the video showing the gamer is typically a tiny “picture in picture” deal, and he/she isn’t moving around much. For fitness classes, the coach is the main event and typically sole video source, so any ‘amateur hour’ production quality is magnified.
5. Interactivity
Production quality is important, but interactivity actually matters more. I remember chatting with a studio that was “live streaming” spin classes over Vimeo, but the user experience felt exactly like watching a canned video, so much so that the studio eventually decided to prerecord and edit the classes and then just push them out at a specific time, like Peloton Encore. People won’t pay $15 “pay per view” per class for that, it’s not worth trying.
You can get some interactivity in Zoom, but there’s little quantitative competition there, and it’s hard for a coach to comment much on attendees if the coach is trying to do all those burpees or yoga positions at the same time. Peloton, Mirror, Tonal, etc use a blend of technologies and techniques to differentiate over free content, but those are hard and expensive to create and operate. Fixing this problem at a low price point is a big focus for Tribe in working with boutique fitness brands.
In contrast, in-person classes have tons of interactivity and accountability. The coach can easily see everyone at once, go round and comment on people, the whole experience is 10X. And if someone keeps showing up to a spin class then each time just peddles slowly without breaking a sweat, the judgement can be palpable. OK, it’s true that’s a two-edged sword (which is why many boutique ads focus on overcoming the newbie fear of looking stupid), but there are absolutely a ton of qualitative if not quantitative metrics for in-studio classes.
6. Tiny Wages
Perhaps the inevitable outcome of the points above, it’s really hard to make a living as a freelance virtual coach. You still have high client acquisition costs, the clients aren’t willing to pay much for virtual, and they don’t tend to stick around for as long as members of a physical studio because the bond is weaker. Once you factor in the costs of running a business (marketing, selling, tools, accounting, etc), a lot of freelance virtual coaches have figured out they were working for less than minimum wage. So they give up.
By comparison, for studios to make unit economics work for virtual, they can take advantage of one or more of these four strategies:
- Scale: They have so many physical members (and possibly lots of locations in larger franchise businesses), which means that they have a large enough pool of clients looking to also take virtual classes. This in turn means they can run virtual classes and get 15 or more people showing up regularly to each class. Barry’s and Orangetheory are taking this approach.
- Gamification on Demand: This is copying Peloton - rather than worrying about a live experience, you use metrics and leaderboards to differentiate over free content in on-demand workouts. Then you don’t have a real-time matching problem like in live classes. Xponential is investing in this area, other boutique studios are trying to, and Tribe is uniquely positioned to help here as an interactive fitness software platform.
- Bundling: The focus here isn’t on virtual being a separate (paid) product offering, but more of another benefit for members who are paying for in-studio memberships. It lets members workout from home and stay connected, and can also increase the max capacity of the studio because it essentially extends the studio square footage into people’s homes. Most larger boutique brands with all access membership are trying some type of bundling.
- Hybrid: In hybrid classes, you have people working out in the studio as well as from home at the same time. This is hard to do well, but if you can nail it, it means virtual becomes a low cost add-on to what you were already doing for in-studio classes anyways.
Let’s compare again to Pro gaming on Twitch - something I still don’t personally have great end user empathy with, but one of the founders I spoke to was a key executive at Twitch. Twitch created the market for online Esports, but when Twitch was getting started, there were tons of people already playing video games because they enjoyed it. Twitch could start off more like an Instagram model with people live streaming what they were doing for personal enjoyment, and then let the commercials grow over time. Most fitness coaches are doing this to make money today - they aren’t live streaming their personal workouts, they are creating special group class content as part of a separate and additional task with associated time and expense commitment. And as above - fitness for participants in a class is hard work, not passive entertainment.
Virtual Coach Tools Challenges
These are (or were) challenges faced by the vendors I mentioned at the start - as many of the coach tools and marketplace vendors have given up and shut down.
1. Coach Acquisition Costs (CAC)
At the start, acquiring coaches was quite difficult because there was a wave of creator tools for personal trainers that all came out at the same time. This pushed up the cost of direct ads on Google and other places, and it also meant more confusion in adoption cycles as coaches had to look at (and evaluate) a bunch of tools (vendors) and try to figure out which would be best. It was a crowded space - now the ecosystem is perhaps depressingly trending towards “last startup standing”.
2. Price Sensitivity
There’s a lot of tools out there for creators - including generic video hosting sites like Vimeo, video chat tools like Zoom, creator tools like Patreon and even regular website tools like Wix. Trainers were also using free options like Instagram Live, YouTube, basic Zoom and many others to do sessions with their clients. Ironically some trainers are investing heavily in Vimeo OTT and their own fitness apps, but this is the other end of the market where they want their own brand (see below). Price sensitivity from the “long tail” of fitness creators is half of the Life Time Value (LTV) challenge that coach tools have faced.
3. Coach Churn
In general, regular coaches struggle to make money doing virtual businesses with their customers, for all the reasons above. This means that even if the software is working great, the coaches are giving up and going back to their day jobs - teaching in a physical studio, or whatever other job it is. This is actually a problem for the studios doing virtual too, as many of the coaches are freelance and paid based on class size - would you rather teach 5 people paying $10 each in an online class, or 20 people paying $25 each in a face to face class?
Ultimately, if the CAC for acquiring coaches is high, their LTV is low (not willing to pay much and churn fast), then the unit economics for the vendors are fundamentally broken. Many founders of startups in this niche figured this out and moved on.
4. Marketplace Liquidity
This is really more of a problem for the coaching marketplaces (Moxie, Salut, Recess), but is still a second order problem for the SaaS tools providers (Talent Hack, Interval, Indifit, Arketa) - if the coaches can’t get enough people into their virtual classes. Liquidity means matching buyers and sellers - it’s kind of a chicken and egg or horse and cart problem. Uber, Airbnb, Ebay - they have all fought their way through liquidity challenges.
In coach marketplaces, if you have lots of coaches giving live classes but only a handful of clients per class, then the coaches aren’t getting paid much. If you have a bunch of clients looking for classes, but no coaches with available classes, the clients will often delete the app. In my own experience of the coach marketplaces, I saw some live classes with zero participants (essentially then just recording a video for on demand), and no classes with more than 5 participants.
As one of the coach marketplace founders I spoke to said to me, he’s convinced now that the right answer is to start with SaaS even if a content marketplace is your end goal. In the studio world, both Forte and JetSweat have pivoted into software from being direct to consumer content subscription services at the start.
5. Total Market Size
Talking to another founder of one of the now shutdown startups, he said, “Hey look, I sat down and made bullish estimates for how many coaches every one of the startups in this space might have, and then I realized that even if I could convert all of them over to my platform, it would still be tiny. And on that day, I gave up.”
Venture capital (investor) backed technology companies need big markets, rapid growth, and at some distant point in the future - profitability. Venture investors want to believe in the opportunity for 10X returns on their capital at the first set of rounds (pre-seed, seed, A, B, C) - all the ones before growth stage investing.
6. Technology Importance
One of the follow on comments the same founder made to the previous statement was that technology just didn’t matter that much in fitness industry buying cycles. He used the case of Mindbody versus Mariana Tek. As a member of Barry’s, he believed Mariana Tek was a much superior platform for gym management to Mindbody and had much better end user apps, but Mariana Tek was still much smaller than Mindbody. What he took away from that was one or both of:
- Many customers don’t care that much about the technology, and/or;
- The process and timeline for switching software platforms was really hard.
8. Branding Expectations
This is a problem for the marketplaces in particular, but it increases complexity for the SaaS tools players too. Fitness coaches have got accustomed to building brands - inspired by the likes of Jillian Michaels and Tony Horton. DVDs baby! Also the gym management platforms like Mindbody, Mariana Tek and Glofox as well as creator platforms like Vimeo and Uscreen - they all offer white labeled or branded apps.
Very few fitness creators want to go participate in a marketplace with other coaches - they want to feel like they “own” that client in their own app. Often times, coaches would rather pay more to have a more basic experience that’s branded rather than pay less to have a more advanced experience that’s on a generic platform. This isn’t as true for other creators in different industries, like on Patreon, or Twitch or LinkedIn Learning. Essentially, fitness creators prioritize brand over functionality.
9. Over Diversification
Is the grass greener on the other side of the fence? One of the now shutdown startups considered going after small studios not just coaches, and Arketa is toying with that space right now. Yes, many entrepreneurs and investors have eyed Mindbody and wondered whether it could be disrupted, but here’s the issue - Mariana Tek, Glofox and others are already doing that - and they have a $10M+ and 5+ year headstart. But the journeys of Mariana Tek and Glofox show that disrupting Mindbody with a new business management toolset is kind of a long grind, not a quick slamdunk.
Summary
The coach marketplace tools space is consolidating, and very few of the new vendors will really be left. Arketa is trying, I keep seeing Facebook ads for a new player (Sommos) right now, there are others like Zomo. There are still the more established businesses like Trainerize that have been around for a decade and seen slow but steady growth, TrueCoach got rolled into Xplor with a bunch of other fitness SaaS companies (including Mariana Tek). But these businesses have histories in and focus on enabling coaches and personal trainers to do face to face or in-gym training, they are not so focused on virtual or online coaching.
One observation is that most of the vendors have focused more on business management tools - members, payments, subscriptions, etc. Generic tools like WIX do a decent job of handling these functions, so do the existing gym management SaaS offerings of Mindbody, Mariana Tek and Glofox. Perhaps ironically, the amount of innovation in the end user experience for members during virtual classes was very limited - Arketa and Talent Hack just launch(ed) Zoom, other apps had experiences that felt way more like Zoom than like Apple or Peloton (almost all the gamification was missing).
At Tribe, it’s the virtual class experience where we are focusing our technology and engineering investments - not recreating the fitness business management wheel, but integrating with the existing tools out there for those functions (Mindbody, Mariana Tek, etc). We want to empower fitness creators to create more compelling content and experiences online, because end user expectations have leveled up during the pandemic after trying the likes of Peloton, Apple Fitness+, Mirror, Tonal, etc. You have to evolve to thrive.
