THE WEEKLY HOWL IS CUTTING COSTS

Get more sleep: It was inevitable. Work-outs have gotten harder, which has made recovery crucial. This has led to a proliferation of companies offering recovery products and services. It’s the next frontier of the fitness industry but is it legitimate. Christie Aschwanden has written a book (Good to Go: What the Athlete in All of Us Can Learn from the Strange Science of Recovery) in order to tackle this question. From Science:

 

Many of today’s recovery modalities, she finds, are based on tiny studies that are not necessarily replicable or representative of the outcomes most athletes should expect. A dismaying number of them are funded by industry. And in many cases, recovery technologies that are allegedly science-based don’t live up to the claims made by their endorsers. After enduring an infrared sauna, for example, Aschwanden points out the lack of any large studies able to demonstrate a significant recovery advantage. The U.S. Food and Drug Administration, she reminds readers, even had to order one manufacturer to stop claiming that its saunas reduced swelling or expelled toxins. There is little evidence to support these claims. Even her own carefully designed “study”—which sought to determine whether beer makes a good workout recovery drink—does more to persuade Aschwanden that conducting sports science research is hard than it does to up her six-pack consumption.

Also:

Aschwanden’s persuasive science and snappy writing helped me relinquish some recovery beliefs I’d been holding for years. Fancy electrolyte-laden sports drinks, it turns out, show no clear superiority at hydrating the body over plain water, and drinking too much liquid can be more detrimental to performance than getting a little dehydrated. The benefits of “precision eating” and protein supplements are probably all in our heads. Icing and cryotherapy might actually do more harm than good. And fitness tracking apps—which focus our attention on a handful of metrics instead of the overall picture—are causing us to ignore the sophisticated training and recovery signals released by our own bodies. It may be better, Aschwanden regularly reminds readers, to learn to trust your own body and its specific needs.

The recovery sub-industry is repeating the same mistakes that the broader fitness industry has always made (selling pseudo-science and shortcuts). For example, The New England Patriots use a sleep tank that offensive coordinator Josh McDaniels claims can cram the benefits of 4 hours of sleep into 45 minutes. Does that pass the common sense test? I don’t think so. I also don’t think that McDaniels made that determination on his own. That sounds like a sales pitch.  

People have always wanted a magic pill or a magic workout. Now that it seems like people have come to accept that there is no getting around hard work, the demand for the magic recovery technique has surged.  Some things make sense such as massage tools like the HyperVolt or TheraGun. Others seem like nonsense. Then there are others that don’t pass the driving test. The driving test is whether it’s more beneficial to get in your car and drive somewhere to receive the treatment or just stay at home, drink some water, and maybe get some extra sleep that night. Because there aren’t going to be any magic recovery fixes. Handheld massage tools are just leveraging technology in order to deliver the benefits of massage at a lower price and greater convenience.

CrossFit: CrossFit Inc. has always been fiercely protective of its trademark. There were only 2 ways to be a part of the brand: get a CrossFit certification or become a CrossFit affiliate. Last year, they deputized a series of functional fitness competitions as Games qualifiers and allowed them to call themselves CrossFit competitions. This week, CrossFit Inc. announced that they would be expanding the opportunity to become an official CrossFit event. From The Barbell Spin:

In a press release today, CrossFit, Inc. announced it is launching an official program to allow for affiliates and organizations to license a competition and receive limited use of the CrossFit name and logo. These CrossFit-licensed events, however, will not send the winners to the CrossFit Games like CrossFit-sanctioned (Sanctional) events.

Organizers of CrossFit-licensed events will be able to sell merchandise with the CrossFit logo, but will also need to “uphold CrossFit-approved standards for safety and programming.” Licensed competitions must have event insurance and the organizer must be L-1 certified.

These CrossFit-licensed events will also be a feeder system to the Sanctional competitions. Before an event can become a Sanctional, the event must first be approved as a CrossFit-licensed competition.

In the past, CrossFit Inc. has tried to hold these events at arm’s length but everyone associated them with CrossFit regardless. It’s smarter to let event organizers use the name so that CrossFit Inc. can exert some quality control.

Look at the aftermath of Kevin Ogar’s injury at the OC Throwdown. Mr. Ogar was paralyzed after an accident during the snatch event. CrossFit Inc. came under criticism for trying to distance themselves publicly from the OCT at the same time that they were demanding things from the event’s organizer. Prevention is better than damage control. Take an active role and set some safety standards. Do something to prevent the next tragedy. CrossFit Inc. planted the seeds for this whole ecosystem to blossom. That’s great but that comes with some responsibility as well. It’s good to see them take it. This will also create a pipelines of competitions vying to be the next Sanctional. I’ve written before that I think the new qualifying system will create incentives for competitions to be professionally run so that they can become a Sanctional event. Right now, I think that the incentive is to come up with the most extreme event. This will encourage more competitions to seek Sanctional status, which will be a good thing as well.  

More CrossFit: Back in August, CrossFit Inc. laid off a bunch of people and announced that there were going to be some changes to the way athletes qualified for the Games. Most of the layoffs were in the media department, the people who made all those documentaries about the CrossFit Games. It felt like a byproduct of a strategic shift. Now it appears that there was another round of layoffs. From Morning Chalk-Up:

In a continued effort to shift the direction of CrossFit Inc., the company executed another sweeping round of layoffs Tuesday at their office in Scotts Valley, CA, the Morning Chalk Up has learned.

Through conversations with former employees, we have confirmed that 21 of in-office employees across publishing, health, video, writing, IT, e-commerce, project management, QA and operations departments were laid off effective immediately.

This is the third round of layoffs the company has gone through in the past six months. Key figures like Rory McKernan and Tyson Oldroyd were included in this round of layoffs.

Also:

With the latest changes, the total number of CrossFit employees laid off over the past half year is approaching 100, according to our best estimates, leaving a skeleton crew to execute on the CrossFit Games vision which kicks off in a little more than five months.

After the Games media and broadcasting teams were completely closed along with several staffers involved with Games support and operations, serious questions were raised in the community about the ability of CrossFit Inc. to execute on their vision for the CrossFit Games going forward.

The stakes couldn’t be higher for the dozen or so remaining Games staffers — including Dave Castro and Justin Bergh — to deliver an event on par with past years, and the latest round of layoffs is sure to send another shockwave through the industry already concerned about the future.

I find this very curious. CrossFit has never been a company that has exerted a lot of cost controls. Lauren Glassman’s rationale for wanting to sell her stake was that the company burned through cash and she was concerned about the financial health of the company. This isn’t terribly unusual for companies that are in a rapid growth phase. You’re growing fast, adding a lot of headcount, and thinking that the good times will never end. CrossFit appears to be in the cost-cutting stage when a company tries to trim its headcount and reign in spending. This stage usually doesn’t come until the growth starts to slow because once revenue stops growing like crazy, management has to stop burning through cash.

We know that domestic growth has slowed and CrossFit Inc. is shifting its focus to international growth. We also know that the majority of its revenue is derived from affiliate fees and certifications. The affiliate fees will continue to roll in but slowing growth would significantly reduce the number of people seeking CrossFit certifications. On the other hand, its debt to Summit Partners should be paid off and I anticipate that its next apparel deal will be extremely lucrative. What we don’t know is whether CrossFit Inc. is in any sort of financial trouble or if it’s just trying to trim the fat.

Even More CrossFit: Jillian Michaels, of The Biggest Loser fame, decided to take on CrossFit. It was an odd take. From USA Today:

 In a video filmed back in December but shared by Shape yesterday on the magazine's Instagram account, the personal trainer bashed CrossFit, listing multiple "issues" with the trendy workout.

"First of all, you’ve got what, maybe 20 to 25 movements that don’t really vary? And you’re doing them over and over and over again," she said. "So on one hand it stops being effective because you’re not challenging the body from various angles of push and pull, with different varieties of exercises and different types of movements that work different modalities.”

She continued, "And I know CrossFit (athletes say), ‘Oh, we work all the modalities!’ — but no, not really, so shouldn’t you choose a workout that has a little bit more flexibility and strength so you get more mobility, not just power, which is speed and strength.”

Instead, she advised a more balanced workout.

“A little agility work, maybe some endurance training,” she said. “So that you’re training in a more balanced way, to keep the body changing and keep your training more holistic by hitting all modalities of fitness.”

I don’t think that she knows what CrossFit is. There are some valid criticisms of CrossFit but not enough variety isn’t one of them. It’s hard to imagine a more varied training program. For strength training, CrossFit incorporates movements utilizing barbells, kettlebells, dumbbells, and gymnastics. Endurance and stamina training involves running, swimming, rowing, skiing, and biking. What else do you want? Are you mad that they don’t use Indian clubs and the Versaclimber? It’s sad that this person is considered a fitness expert when she’s too lazy to do any research. It sounds like she watched 5 minutes of the CrossFit Games and figured that was all she needed to know. It also shows how far the fitness industry has to go. There are people in positions of power and influence in this industry who know very little about fitness. Imagine if someone at a similar level in the auto industry didn’t understand what Tesla was. It’s hard to even fathom but that’s where we are. 

Cycling: CNBC published an article on Peloton this week. It’s a good read and you should check it out but there was one passage that got me thinking.

In particular, Peloton's instructors are part of the secret sauce.

"The way that Peloton has built their instructors into their brand, with many of their instructors achieving a sort of cult status among the Peloton following, I'd say is definitely one of their biggest advantages over alternative at-home fitness equipment and gym and cycling classes," Marisa Lifschutz, lead industry analyst at research firm IBISWorld, tells CNBC Make It.

Indeed, popular instructors like Arzon are one of the main draws, as evidenced by her the nearly 200,000 people who follow her on Instagram. Arzon is known for her high energy, motivational style and her catch phrase, "sweat with swagger," which is also the name of the tribe of Peloton users who specifically follow her classes. She calls Peloton's group of instructors "a team of superheroes" whose job it is to inspire and lead the community.

"We've also built a socially engaging platform in the workouts themselves," Arzon says. "So whether you're getting a high-five from a fellow rider or you're getting a shout-out on your first run ... there's an intimacy there that doesn't exist most places, certainly not in a space where you're interacting digitally, and instructors are kind of breaking that fourth wall and in people's homes. That's really powerful stuff."

The feeling seems to be mutual. Sara Richards, 44, a medical writer and mother of four who lives in Los Angeles, tells CNBC Make It that she'd tried SoulCycle a few times, but "was not very impressed with any of the instructors." After she tried Peloton last year, Richards says, she felt more of a "personal connection" with the instructors, especially Arzon. "When she is talking to that screen, she is talking to me," Richards says.

This is anecdotal evidence which is highly unreliable and it’s not as if SoulCycle’s instructors don’t have followings. However, I’d love to see compensation numbers for SoulCycle and Peloton because I wonder if Peloton is paying its instructors a lot more right now. The thing is that Peloton scales, SoulCycle does not. There is no limit to how many people can stream a Peloton class but there is a limit to how many people can attend a SoulCycle class. As Peloton continues to grows, it is going to be able to pay its instructors more than its brick-and-mortar competitors. Maybe they are already doing this, maybe they’re not but having the best instructors (because they can pay more) could develop into a competitive advantage for Peloton.

Paying the bills: I came across 2 articles this week that were pushing the idea that boutique classes are as expensive as they are in order to signal quality and exclusivity. Both articles featured quotes from the founder of the Association of Fitness Studios. From Refinery29:

 So, how did studios land on the magic number $34? There are a number of factors that influence how companies set prices, like understanding how to stay competitive in the market, but it ultimately comes down to "knowing that what you set as your pricing also influences the consumer’s perception of the quality they will receive," Josh Leve, founder and CEO of the Association of Fitness Studios, the trade association that represents studio owners and entrepreneurial fitness professionals. "If your fitness studio is focused on delivering the best possible experience for your members or clients, but you price below what others are charging to generate business, then consumers will believe that your offering is average; counter to how you have positioned your studio."

And from Insider:

It comes down to "knowing that what you set as your pricing also influences the consumer's perception of the quality they will receive," according to Josh Leve, founder and CEO of the Association of Fitness Studios, the trade association that represents studio owners and entrepreneurial fitness professionals.

Speaking to Refinery29, he said: "If your fitness studio is focused on delivering the best possible experience for your members or clients, but you price below what others are charging to generate business, then consumers will believe that your offering is average; counter to how you have positioned your studio."

This is the luxury model of pricing. It’s how you get handbags that cost thousands of dollars. The problem is that it’s not true in this case. Let’s think about the cost structure of these companies. Most of their recurring expenses are going to be rent and labor. In the markets where boutiques thrive, rent is often prohibitively expensive. Manhattan is home to SoulCycle and Flywheel and Ground Zero for boutique fitness. Even a relatively small retail space (1500 square feet) could require annual rent payments in excess of $1 million. That is a huge fixed cost. On top of that, you have a highly skilled labor force that you need to pay well (because they have to live in these expensive areas as well). That’s why boutique classes cost so much. It’s not luxury pricing so much as it’s the price of retail space in NYC. The other areas that these companies want to focus on are also expensive, urban areas. This is what is setting the pricing. My next question is why is the Association of Fitness Studios is pushing this idea right now. Are they just trying to make it seem like they know what they’re talking about or is there some kind of agenda here?

Tidbits:

-Read this oral history of the Stairmaster

-Don’t ask people to sign NDA’s in order to get a refund

-The U.S. Army has filled its functional fitness competition team

-Chris Hemsworth’s fitness app is already the top fitness app in the U.S.

-Netflix shouldn’t be giving a platform to Goop’s nonsense

-Sporting good store bans Nike gear, goes out of business