Trends in the At-Home Fitness Market

The at-home fitness market got a shot of adrenaline from COVID-19 as the world shut down and many consumers searched for an outlet to alleviate pent-up frustration and to counteract cabin fever. Mary Figuers Stallings of GLG’s Private Equity Content Team sat down with Paul Sutter, former EVP, Digital Product and Engineering for Beachbody, to discuss the at-home fitness market, including the trends driving growth, a look at the competitive landscape, and the state of at-home subscriptions. The following is a sample of the event that has been edited for clarity and space.

What is the competitive landscape in the at-home fitness market?

Much has changed in the last few months regarding sentiment, but the players are still there, and the models haven’t changed much. There are new products and new content, and the big names — Beachbody, Peloton, Lululemon with Mirror, NikePlus, Apple Fitness, and Tonal — continue to offer tiered membership, free, and freemium models.

Connected fitness, which is growing, includes Peloton and Beachbody, and Zwift. Personal trainers also blew up at the start of COVID-19, and that’s found its way into the connected space. Brick and mortars are using a hybrid model, with coaching and on-demand content.

What is the growth outlook of various at-home fitness models in today’s market?

There was a report done a year or two ago by Global Markets Insights suggesting the market would grow 30% annually through 2026. We’re not growing at that rate now. There has been a lot of turbulence, largely in the Peloton results, changes in guidance, and the supply chain manufacturing issues, but the market is strong.

Are you seeing potential opportunities for consolidation and investment?

This is where we’ll see activity. The market has to consolidate. The pandemic shined a light on it because it made people consider all of their choices. Right now, there are far too many choices. It’s important the players differentiate themselves in meaningful ways. The equipment makers are likely going to consolidate brands. Brick and mortar will strike up partnerships and offer memberships with connected equipment providers.

In addition, large-cap companies are trying to buy their way in. Amazon is good at content and delivery, they have a data trove, and they can manage the hardware supply chain. Apple is great at content delivery, hardware, and subscriptions, but they have a struggling fitness segment. I see them partnering vs. making their own equipment. Sony’s another potential contender.

Virtual reality is a new frontier, and that’s where new investments will occur. We’re starting to talk about the metaverse, about taking your avatar across platforms.

Can you address the differentiation among the various at-home platforms that exist today?

There are many ways to look at it. For equipment, treadmills and bikes are the first tier, boasting the greatest market share. Next is rowers, and then niche items, such as wall devices. There is purpose-built equipment — think of boxing, FightCamp, Zwift, and Wahoo — which include different equipment types with wide price ranges.

The differentiation might be the type and number of workouts available to stream, which for some products numbers in the thousands. Production quality is another differentiation point. People won’t be interested if the production quality and the technology delivery are not there.

Subscriptions for digital products soared during the pandemic, but what level of subscription activity do you see in terms of churn, especially now that people are returning to in-person gyms?

While the subscription curves might be flattening, I don’t see them retreating. The markets love to look at paying members and new subscribers. I like to look at what the engagement is, because that is what translates into long-term revenue.

You’ve talked about the importance of community. What are the at-home fitness providers doing to tap into the need for community?

We often perform better when people are around us, coaching us, encouraging us. Bringing together virtual groups for at-home fitness is where some of these companies are starting to succeed. Beachbody did this a couple of years ago with BODgroups, a Facebook-style accountability group. You’ve heard about the “cult” of Peloton. That “cult” maintains retention and long-term revenue. The community around consumers creates accountability for them to continue to work out and improve.

Peloton has been all over the news lately. How do you expect this to affect them long term?

We look at the Sex and the City episode and Peloton’s response in a commercial, and then what happened in Billions. That preceded what happened in the last week or so from a business sense. Let’s put the TV commercial aside. What they’ve been impacted by and what’s been very public are the leaked slides that came out and plans to delay additional equipment manufacturing.

Peloton started charging for premium delivery setup, and that’s increased prices. I’m concerned about that for their equipment sales. They also planned on building their own plant, in an attempt to go vertical. Forty percent of revenue is subscription-based, and that’s likely remaining flat. They’ll need to weather the storm.

What about virtual reality? What role does it play in at-home fitness?

It’s going to be huge. There are some interesting applications for on-the-floor fitness. You are playing games, but it’s absolutely fitness. Think of Wii Fitness, but in virtual reality. There’s a game called “Supernatural,” where you hit targets and dodge obstacles. It’s a high-intensity interval-training (HIIT) workout. There are other examples, using dancing, rowing, and skiing. It will be interesting to watch companies try to jump into this, both existing fitness companies and companies like Meta, which owns Oculus and also purchased Supernatural.

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About Paul Sutter

Paul Sutter was Executive Vice President, Digital Product and Engineering at Beachbody LLC. Prior to this, Paul was Managing Partner at Blue Skies LLC. Before Blue Skies, Paul led multiple technology groups, including Vice President of IT (Division CIO) at Technicolor Entertainment Services. Paul completed a BS in mathematical economics, systems engineering from the United States Military Academy at West Point, in 1993.

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This fitness industry article is adapted from the GLG Webcast “At-Home Fitness | Private Equity Investing.” If you would like access to this webcast or would like to speak with fitness industry experts like Paul Sutter, or any of our approximately 1 million Network Members, contact us.