Apple Fitness+: An Arms Race For Celebrity Fitness Instructor Talent

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Friends,

Apple Fitness+, the companies new digital fitness subscription streaming service, is officially set to launch today.

For those that don’t already know, the service will provide Peloton-style guided workouts that can be viewed on an iPhone, iPad, or Apple TV, while utilizing an Apple Watch for tracking workout metrics as you go — think heart rate, calories, and more.

The price?

Just $9.99 per month, or $3 less than Peloton’s digital membership.

Here are the details (Source):

• The service will cost $9.99 per month or $79.99 per year.

• An Apple Watch Series 3 or later is required.

• The app integrates with Apple Music.

• There will be 10 different workout categories—ranging from Strength & HIIT to Dance & Yoga—each with a duration option of 5 minutes to 45 minutes.

While Apple says, “many Fitness Plus workouts require no equipment at all or just a set of dumbbells,” you might need things like a yoga mat, a stationary bike, a rowing machine, or a treadmill for certain equipment-based workouts.

Sounds great, but what does this mean for Peloton?

From a macro perspective, Apple is entering the content side of digital fitness attempting to use their existing hardware products—think iPhone, iPad and Apple TV—to distribute content and connect subscribers.

What about Peloton?

Well, they don’t seem scared.

Here’s what Peloton Founder & CEO John Foley said in September (Source):

To be fair, he’s right — but a lack of “connected platforms” doesn’t necessarily mean Apple won’t thrive within the digital fitness ecosystem.

I think both Apple & Peloton can co-exist.

Peloton has spent the last decade building out cult-like brand awareness and loyalty, while Apple will have the advantage of existing distribution and network effect.

For me, the economics are more interesting.

Peloton reported more than 315,000 paid digital subscribers in September.

The interesting part?

They don’t make any money on them.

CEO John Foley has called digital subscriptions “a nascent business” that operates on a “break-even” basis, but speaks highly of their ability to convert digital customers into much more lucrative connected bike & treadmill subscribers (Source).

In simple terms, they use $12.99/monthly digital subscriptions as a stepping stone to create customers with $2,000+ lifetime values.

Apple’s challenge will be the delicate balance between increasingly expensive content creation and reaching desired profitably.

Let’s break down the economics…

• Peloton instructors reportedly make $500-$750 per class

• Peloton instructors teach 10-15 classes per week

• Peloton instructors make $260,000 to $585,000 annually

Even more interesting, in order to attract the best talent without a proven business model, Peloton gave their earliest instructors stock options.

My prediction?

Similar to how streaming services like Netflix & Disney+ are spending hundreds of millions of dollars on original content creation, we’re about to enter into a decade-long arms race for celebrity fitness instructor talent.

As Apple starts to build out a fitness content library more similar to Peloton than Mirror—in quality not necessarily uniqueness—it’ll be interesting to see how profitable the business can be.

For Peloton, the real question becomes — are they willing to continuously challenge Apple on the digital front, increasing their annual spend on instructor talent & content creation, in order to maintain the economics on their connected fitness platform?

Only time will tell, but for a business with such a niche product/market focus, I think it’s safe to assume they will.

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