Insider No. 59: The Connected Fitness Wars

From Netflix to Hulu and HBO Max to Disney+, the streaming wars are upon us. Similarly, as the Peloton of ‘X’ category earns hype and heaps of funding, the connected fitness wars have officially arrived. Now, new entrants, legacy companies, and the next generation of fitness brands are going head-to-head in an attempt to win over would-be exercisers.

But, taking a closer look, the word ‘war’ might be a misnomer. Instead of an endgame, connected fitness is proving to be more of an industry-wide evolution than a winner-take-all proposition. Going a step further, maybe connected fitness isn’t quite as innovative as it was made out to be. Or is it that Peloton’s perceived “moats” aren’t a real deterrent? Let’s take a look.

By the numbers. There’s no denying that connected fitness has been and will continue to be a disruptive force. But let’s put its impact in perspective. (For more, check out the comments on my recent LinkedIn post.)

  • Peloton connected fitness subscribers: 560K
  • Peloton US addressable market: 45M households
  • US gym/studio memberships: 60.9M
  • US population: 327M

Paving The Way

Peloton did the hard work of popularizing connected fitness. Now, everyone wants to cash in. And, as is often the case, defending the top spot can be as difficult as obtaining it in the first place. If there’s any doubt, consider a few developments from 2019.

Mirror, Hydrow, and Echelon Fitness each added new funding. Equinox announced plans for a Precision Run treadmill, SoulCycle bike, and yet-to-be-named digital platform. Technogym unveiled its LIVE platform and accompanying equipment. Life Fitness rolled out on-demand classes across all of its cardio equipment. And iFit, whose parent company ICON Health & Fitness also owns NordicTrack, ProForm, and Freemotion, secured $200M in funding to accelerate its interactive streaming platform.

For context: While Peloton and other startups begin at zero, equipment manufacturers and established brands are leveraging their existing capabilities, distribution channels, and customer base to build out their connected fitness offerings.

  • Life Fitness equipment is in 250K facilities. Its annual revenue is about $1B.
  • Across its portfolio, Equinox Holdings has 135+ locations and $1.43B in 2018 revenue.
  • iFit has 330K paying subscribers. In Q3 ’19, they added 77K subscribers.
  • Technogym brought in ~$700M in 2018. 50M people train on their equipment every day.

About those “moats”… In medieval times, physical moats were built to protect castles from invaders. In startup speak, moats relate to defensibility. More specifically, a moat is how a company establishes and maintains competitive advantage, market share, and long-term viability.

With respect to Peloton, the company has doubled and tripled down on their moats — better equipment, talented instructors, subscription-based content, and an obsessive community.

Initially, detractors pointed out the obvious, Peloton simply put a touchscreen on a stationary bike. But time and time again, its passionate user-based sprang into action, singing the company’s game-changing praises and proving naysayers wrong. And for years, all the company had to say was, “if it’s as simple as putting a screen on a bike, why isn’t everyone doing it?”

Flash forward a few years and, well… everyone is doing it. Making matters worse, Peloton’s public offering did little to solidify its position atop the category. In fact, it resulted in more intense scrutiny as onlookers question their every move.

Peloton might have gone down market too soon. By appealing to an affluent and aspirational customer, Peloton built a cult-like brand and community to rival SoulCycle. Then, at the behest of the public market, they cut prices, announced cheaper equipment, and confronted messaging issues. And in the process, balancing affluence and aspiration with affordability proved difficult to navigate. As Peloton’s bloated valuation looms large, the company is forced to focus on growing from one earnings call to the next.

Meanwhile, the competition is finding its footing. Mirror plans to move beyond in-home workouts to become the go-to screen for any immersive experience. But, like Peloton, Mirror is also realizing that their hardware isn’t as defensible as they once thought. Echelon now offers an interactive Mirror-like device, and it’s only a matter of time until others follow suit.

Looking Ahead

Connected fitness might end up being a pit stop on the road to augmented and/or virtual reality. Although Zwift doesn’t make hardware, they have created a virtual fitness world for their thriving user base. And Hydrow CEO Bruce Smith told us that the company could release rock climbing and cross-country skiing products that utilize Live Outdoor Reality or augmented reality to create an immersive environment.

Circling back: At the onset, streaming services like Netflix were a disruptive force and an escape from pricey cable bundles. Now, it’s ubiquitous. So much so, in fact, that we can’t possibly afford every subscription or even keep up with all the new shows.

Similarly, connecting fitness is quickly becoming a commodity — something that could soon be available on every piece of equipment, or at least most of it. And if that’s true, it begs the question, was connected fitness all that innovative to begin with?

📊 Data Driven

Amid a shifting fitness landscape, including continued pressure from on-demand fitness options, boutique studios are upping their game to attract and retain members. The most recent example saw Orangetheory Fitness (OTF) partner with Apple in hopes of improving the member experience.

Sync-up. The new device, called the “OTbeat Link”, attaches to the band of an Apple Watch, tracking heart rate and syncing that data to a live leaderboard in each Orangetheory class.

  • The OTbeat Link will cost $129.
  • Two new apps for coaches were also announced.
  • According to OTF, “43% of members are already using their Apple Watch during class”.

For OTF, a studio that stresses data and a science-backed approach to exercise, this move enforces their value proposition. And, for members who are likely to obsess over their performance and activity stats, OTF workouts will contribute to closing their Apple Watch Activity Rings.

Punchline: From the home to the studio and the office to a hotel, integrated-technology, connected fitness, and on-demand content are becoming the status quo. At a time when consumers have more options than ever, providers are looking for a hook — and OTF hopes they’ve found one.

Meanwhile, mega brands like Apple are well-positioned to preside over the entire health and fitness sector, creating an interesting proposition if they were to acquire a Peloton or a Strava. A fitness, healthcare, data roll-up doesn’t seem farfetched.

🍖 Meat kills. Meat cures.

At a time when plant-based everything has taken over, you might think that meat has fallen out of favor. But a new cult diet is putting meat at the forefront of every meal. In fact, they’re not eating anything else. Enter: the carnivore diet.

Here’s the beef. Proponents of the so-called Carnivore Diet don’t eat anything but beef, salt, and water. No vegetables, no fruit, no grains — just beef. The result? Based on dietary recommendations, this group of self-identified carnivores should pretty much be dead. Instead, they’ve taken to the internet to expound the many benefits of an all-meat diet.

Noteworthy disciples include Mikhaila Peterson, the daughter of controversial professor/psychologist Jordan Peterson, and Dr. Shawn Baker, the former surgeon and current lifestyle coach responsible for the modern interpretation of the diet. While the testimonials read like miracles—advocates have been cured of diseases and are in the best health of their lives—dietitians are baffled.

Takeaway. To eat meat or not to eat meat? And now, do we exclusively eat meat? From The Game Changers to the Carnivore Diet, it’s no wonder why people struggle with what to eat. In a world of headline-reading and hype, a bit of logic goes a long way.

📰 News & Notes

💰 Money Moves

  • iFit, whose parent company ICON Health & Fitness also owns NordicTrack, ProForm, and Freemotion, secured $200M in funding to accelerate its interactive streaming platform. More from Fitt InsiderThe Connected Fitness Report
  • Perfect Day, maker of animal-free dairy products, closed $140M in Series C funding. For context: Plant-based Everything
  • Soul Community Planet, a “holistic hospitality” company, secured a $5M investment. On the topic: The Rise of Wellness Tourism
  • Kindbody, a women’s health company, added new funding from GV (formerly Google Ventures) and other investors, bringing the total amount raised to $32M. Terms were not disclosed. Read more: The Women’s Health Revolution 
  • Non-alcoholic sparkling beverage brand Dry Soda Co. invested in and partnered with Sans Bar, an Austin, Texas-based sober bar. Go Deeper: Sober is The New Cool 
  • The UK’s largest gym operator, PureGymwill acquire Danish group Fitness World in a ~$460M deal.
  • Bright Health, a consumer-focused healthcare company, closed a $635M Series D funding round. Related: The DTC Healthcare Report 
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