2020 The Year of Digital Fitness

A mounting body of anecdotal evidence from around the world shows how the coronavirus has changed the ways we move. This should not come as a surprise as we are almost a full year into the pandemic changing our regular habits of daily movement. I used to do 10,000 steps just going to and from the office, my fitness regime included a personal trainer once a week and I would enjoy the occasional boxing, indoor cycling or HiiT class. Now, in lockdown 3.0, known as Tier 4, my average steps are down 37%, the PT has been on hold since March and most indoor classes have moved to a digital platform.

This end of year review is more a look at transformation and innovation. We still have a need to share experiences, albeit virtual ones, to keep motivated. Strava with 70 million active users, growing by 2 million a month, is the largest sports community in the world covering 195 countries. Data from Strava Labs shows users in the UK, over 60 years old, were 37% more active between April to September than a year ago, globally the uplift was 12%.

During the first lockdown Google searches for ‘exercise’ spiked and an emerging tool called conversational analysis is uncovering a plethora of connections between consumers and exercise habits. The idea that the future of activity can be neatly extrapolated from the past is now a fallacy. Sport, exercise and movement are agents of change at the crossroads between activity and technology.

 It is estimated that home workouts jumped from 8% to 53% during 2020. Over the same period investment in the new category of connected fitness topped $1 billion. Three of the many companies in this category have achieved unicorn status while traditional sites have been shuttered. New investors like Walt Disney, Amazon Alexa Fund, Specialized Bikes VC plus many major sporting and music celebrities are convinced the world will emerge from the pandemic with a greater reliance on technology. The global connected equipment market is set to be worth $6 billion by 2024 according to Grand View Research spurred on in the knowledge that Americans spent $2.1bn on home fitness equipment between March to September this year alone.

Connected home equipment could mean we are more networked than ever whilst remaining home alone. Our base natural social instincts will need to drive the new concept of hybrid fitness, where exercise, activity, at home, outdoors, your second or third space needs to be built into daily activity and the environment. Areas that have in the past promoted inactivity need to be repurposed and viewed as a natural playground. Hybrid activity and instant data feedback will put pressure on fitness sites and sports clubs, when they reopen without restrictions, to offer more interpersonal support and experience around achieving goals.

Coronavirus opened a vast new space for personal fitness while the traditional sector lay closed or working at reduced capacity. Historically the Leisure Database Company have trend data showing how the UK fitness sector has been recession proof during 1980-81, 1990-91, 2008-09 however, the pandemic has given the sector an unprecedented shock that dwarfs any recession. No event has reduced occupancy levels to 65% or less, no supplier or operator has modelled business being shuttered or hampered as in 2020.

Pre-virus, London was trending as hard as New York or Los Angeles with around 16,000 boutique classes each week, where the top brands sold 10 class packages for between £180-£250. The private fitness clubs had 15.2% penetration rate across the capital and the average monthly direct debit across the 549 clubs was £66.43. The public sector had 271 sites charging an average of £34.52 and achieved a 5.6% penetration rate. Re-opening in London, like all major cities, has been problematic so how does the industry get back on trend. Exemplified by Aristotle’s conviction that humans are, above all else, social animals, and the energies of cities comes from the gatherings. A quick poll on Instagram and Twitter suggests the micro trends are transforming these gatherings into on-demand platforms.  What we considered ground-breaking is ever evolving and merging into other sectors.

The athleisure brand Lululemon made their first investment into digital following the $500 million acquisition of start-up Mirror. Based in New York the wall mounted ‘mirror’ streams workout classes for a monthly subscription of $39pm. The expected revenue from hardware and subscriptions is $150m this year. The tie-up provides Lululemon with a connected showroom, the opportunity to strengthen its growing community, expand the content creation and become an experiential brand.

Apple’s launch of Fitness+, a subscription bundle to include virtual classes integrated with the Watch, Music and Cloud storage will become a no brainer for many. Apple remains the global leader with 55% of the smartwatch market and its wearables, services and accessories division reached an all-time revenue high in Q2 of $6.3 billion. Fitness+ will bring more attention and investment to the connected fitness category and the most recent example has Orangetheory Fitness partner with the Watch to improve member experience syncing data to a live leaderboard in class. According to Orangetheory 43% of members use their watch in class.

It took Apple 42 years to get to $1 trillion in value and then just 5 months to get to $2 trillion. The increased value comes from recurring revenue. In a low growth economy with zero interest rates, Amazon (Prime) Netflix and yes, Peloton, are increasing shareholder value and market capitalization on the forward projection of the recurring bundle.

Peloton Interactive Inc with a market capitalisation of $44.06bn at the time of writing is worth more than all legacy equipment supply companies put together. It has also surpassed the value of the entire US fitness industry in 2019. Peloton stock surged in December on the news it was buying equipment company Precor for $420m.  Peloton had 1.3 million connected subscribers between July – September, up from 563,000 the previous year. On an earnings call Peloton said its average subscriber worked out 17.7 times a month in Q1, compared to 13.9 a year before. The company initially targeted the healthy and wealthy, including Rishi Sunak the UK Chancellor of the Exchequer, but pre-pandemic the company pivoted into apps and on-demand making it easier and cheaper to access classes without owning their equipment. Peloton Digital at $12.99, or £12.99pm in the UK, is set to grow the software revenue. When you add in the compatibility with other devices, like Smart TV and Watches, plus the new partnership with Beyonce on themed workout experiences, the intention is to become the most influential media company with a target of 100 million subscribers.

Tonal has the audacious future goal of $100 billion valuation. With an IPO on the way, having just raised another $110m, the total funding for the AI home gym tops $200m. Visit the Stanford Shopping Centre in Silicon Valley and you too can experience the sensor fusion algorithms that automatically adjusts the weight and pacing of your home workout. Every workout is composed of personalised audio and video clips stitched together, just for you. Software updates – like Tesla – happen overnight. This level of personalisation costs $49 pm and equipment around $3,000. Tonal has been successful in attracting sports celebrities as ambassadors and investors, including Serena Williams who invested through Serena Ventures. Tonal has partnered with the players associations in the US for the NBA, NFL and MLB. The latest round of funding includes existing investor L Catterton (the largest consumer-focused private equity group in the world and backed by Louis Vuitton Moet Hennessy (LVMH).

L Catterton has also invested in Hydrow, the maker of stylish rowing machines for home who have raised $25m. This start-up has seen sales grow by 400% during lockdown and the new investment will see Hydrow expand into mat-based workouts so consumers can mix on-water rowing through streaming classes plus functional movement. The average Hydrow user records 14 workouts a month. Hydrow has also attracted a number of celebrity users and professional sports players from Basketball and Tennis. The newer, smaller, connected, rowing start up Ergatta, is based around a gaming inspired platform using the established WaterRower machine.

Back on dry land the fresh air friendly Aaptiv is an audio fitness app where instructors guide users through running, cycling, yoga and other workouts. It’s raised $75m so far and users have collectively taken around 40 million classes to date. Three big names have invested, Amazon Alexa Fund, Walt Disney Company and Warner Music Group all attracted by the concept of personalised fitness instruction for the masses.  

The UK standout unicorn is Zwift. With 2.5 million accounts created since its launch across 190 countries and growing at over 200% per month during lockdown. Main sponsor of Tour de France on ITV4, and host platform for the inaugural UCI Cycling Esports World Championships, Virtual Tour de France and the Virtual L’Etape du Tour in July. Having done two L’Etapes for real I’m now happy to be on the virtual Everest Challenge so I get the flash wheels. The new funding round led by global investment firm KKR raised $450 million at $1bn valuation, pulled in Specialized Bicycle VC Fund, Amazon Alexa Fund, as well as Permira and existing investors True and Highland Europe. Ilkka Paananen, CEO and Co-Founder of the video games developer, Supercell, joins Zwift as an independent board member and investor.

FiiT has come a long way since the original seed investment of £2.4m at the end of 2017. They offer real-time performance feedback, live leader boards and all on your mobile device or smart TV. You can now stream content including Hiit, Yoga, Pilates, and breathwork via a monthly, quarterly or annual subscription. FiiT are now collaborating with the UK National Health Service, Hussle, The Gym Group and most recently SkyQ (who have 3.6m subscribers) which has seen FiiT’s subscriber base grow by 500% year on year. Billed as the Netflix of fitness FiiT brings the excitement of studio workouts into your home.

The British technology start up JaxJox has reinvented the kettlebell and seen 10 times year on year growth. Billed as the all-in-one interactive studio the connected technology adapts to your workout. Even the foam roller is connected. The vision is to close the gap between fitness and health by using AI and machine learning to monitor performance metrics. The £7.7m investment will go towards the Interactive Studio development and proprietary FitnessIQ score. Nigel Wray, the owner of Saracens Rugby Club and investment group Dowgate Capital bring the total raise of £13m to date.

A year ago I downloaded the Motosumo app and to my surprise it measured my cadence in real time. The measurement and visualisation technology that uses motion detection algorithms has improved to cover cycling classes and other workouts. A third funding round took total investment to over £3m. The partnership with Core Health & Fitness supplier and with Ignite Your Burn fitness programme gets the app a wider audience. 

Legacy equipment suppliers are also pivoting. Italian wellness company Technogym saw their direct-to-consumer sales increase by 50% in the first half of 2020. This category now accounts for 30% of revenues, twice that of 2019. The immersive sense of community in the studio can now be streamed live from Revolution at Virgin Active in Milan or 1Rebel in Victoria, London, subscription cost £39pm which can be bundled to include equipment and the Mywellness app.

After all this activity if you need to recover try WHOOP. This is newest unicorn tech company raising $100m Series E at a staggering $1.2bn valuation. Following a period of high growth monitoring sleep, strain, recovery and - in response to the pandemic - respiratory rate fluctuation. Elevated respiratory rate might be cause for concern and can now be picked up before lower respiratory tract infection symptoms are apparent to the wearer.

Biodata from wearing smart devices like Apple Watch, Oura Ring, Fitbit and WHOOP have all shown to provide an early warning system of deviation from the norm. Its inexpensive, quick and all about continuous data and analytics. Historically both healthcare and fitness have been relatively slow to adopt digital transformation but Covid-needs-must have fast tracked new ways of working and accelerated adoption of new tech. The convergence between fitness and health is here to stay as tech companies, both big and small, leverage data gathered through the digital links, data that will be highly valuable and will drive constant innovation.

Will all this investment and innovation drive a democratisation of participation or simply provide more choice and experience for the already committed?  During lockdown I have been exercised by Daniel Liberman’s thought provoking book Exercised. Liberman analyses how exercise is fundamentally strange and unusual behaviour from an evolutionary anthropological perspective. This goes some way to explaining why fitness has failed so far to go beyond the 15.6% penetration rate in the UK and why politicians have not made improving the health of the nation a priority. The base natural instinct to preserve energy, unless it is vital to life, remains part of our evolutionary history. No amount of medicalisation and commercialisation of the fitness products so far have impacted the majority of the population, because we never evolved to exercise.

Movement needs to be treated like education and health, a constant learning process from cradle to grave. As Bill Bailey at 55 winning Strictly Come Dancing proved it’s never too late to start. My mother took up yoga in her late eighties and a personal trainer in her nineties, both helped improve her balance. It was also fun, social, emotionally worthwhile and she was willingly committed to improving. Post-pandemic is the time to pivot and reimagine how movement is presented and thought of in society. A time for a new mega-trend of health and wellness to emerge where movement, fitness, sport is the by-product of improved public health.   

David Minton

Founder, The Leisure Database Company

December 2020