On a recent weekday morning, Alex Toussaint, a cycling instructor at Peloton, welcomed people to his ’90s hip-hop spin class — 50 who were right in front of him, and more than 200 riders who had tuned in from around the country. Peloton’s sleek space may look like one of many boutique cycling studios around Manhattan, but it also functions as a film studio, broadcasting to thousands of riders who watch classes from tablets mounted to their Peloton bikes.
As Mr. Toussaint taught the class, he frequently looked into one of four cameras positioned around the studio. He called out words of encouragement to the cyclists at home, by either their real names or their screen names. Later that day, anyone with a Peloton bike could tune into Mr. Toussaint’s class, one of over 3,000 the company has produced. Members can compare their results and communicate with other riders.
Boutique fitness, frequently represented by small companies that focus on one type of workout, is the fastest growing segment of the fitness industry. But it has its limitations — namely location, price and class availability. A new crop of businesses, including Peloton, aims to use technology to bring boutique workouts to users wherever they are at more affordable rates.
Peloton has thousands of riders but only one cycling studio. John Foley, its co-founder and chief executive, considers Peloton not a fitness company but rather a technology company, in part because in addition to building and selling its bikes, it also creates the attached tablet and accompanying content.
The idea for Peloton came to Mr. Foley soon after he became a father. He did not have time for his usual workouts, and when he did, he often found that classes at cycling studios like SoulCycle were sold out or offered at inconvenient times.
When he looked into at-home fitness equipment, all he saw was hardware. “What the consumer wants, what is making people addicted to these classes, whether it’s yoga or boot camp or spin or high-intensity interval training or whatever, it’s the group environment,” said Mr. Foley, who previously worked on the Nook e-reader at Barnes & Noble. “It’s the other people. It’s the instructor. It’s the music. It’s the motivation.”
Thus started the process of manufacturing a bike and tablet, hiring instructors, creating content, and then persuading consumers to give it a try. Although investors were skeptical at first, the company eventually raised over $120 million. Since late 2013, Mr. Foley said, the company has sold 50,000 bikes at about $2,000 each. Bike owners pay $39 a month for unlimited classes.
Many of the bikes are sold at the company’s 17 retail locations, mostly in high-end malls. While the bikes are not cheap, a single class at most boutique fitness studios costs around $30, so after the initial investment, Peloton can be a more affordable option. The average fitness studio member spends $101 a month on classes, according to the International Health, Racquet and Sportsclub Association.
Peloton isn’t the only company offering an alternative to boutique fitness classes and vying for a piece of the health club industry’s nearly $26 billion in revenue. Companies like Daily Burn, Qinetic and FitFusion offer members unlimited streaming video workout classes free or for a small monthly cost.
These companies provide what could be called virtual fitness services, said Dana Macke, senior research analyst at Mintel, a market research firm.
The trend is still emerging. Just 15 percent of consumers who are regular exercisers have paid for a fitness video subscription, and only 16 percent are interested in purchasing one, according to Mintel research.
Ms. Macke said most of these video services had a drawback: a lack of interaction. Companies like Yogaia, based in Helsinki, Finland, have a least partly solved this problem by enabling teachers to see students and offer instructions during live classes. Yogaia has raised $3 million in funding and charges its 10,000 or so monthly users about $9 a month for live and on-demand video classes, a company spokeswoman said.
Traditional boutique fitness studios have entered the virtual realm as well.
Physique 57, a ballet-inspired barre workout studio, now uses a combination of physical studios, where classes cost about $30 each, and video on demand, for which a monthly subscription is around $30.
“Relying only on brick-and-mortar locations will take too long,” said Jennifer Vaughan Maanavi, the chief executive and co-founder of Physique 57. “We have so many people doing on demand who don’t live anywhere near a gym, let alone a boutique fitness studio.”
Cody is a fitness streaming service that started as a social network in 2013. “We had someone attend once from a weather station near the North Pole,” Pejman Pour-Moezzi, a co-founder of Cody, said in an email. “And there’s an active community of women in Saudi Arabia that attend as well.” Cody has 100,000 paying members, and its revenue was $3 million last year. The company became profitable last month, Mr. Pour-Moezzi said.
While boutique fitness studios and virtual fitness programs are growing, 35 percent of regular exercisers still have a traditional gym membership, Mintel research says. “The larger opportunity here is for the apps that can be used both at home and in a traditional gym to really open up these services to a larger audience,” Ms. Macke said, referring to apps like Skyfit, CycleCast, LiveRowing and Pear Sports.
Ethan Agarwal, founder and chief executive of Skyfit, an app with a variety of audio fitness classes, said, “I think there is a largely untapped market of folks who are working out by themselves who still need guidance, or who would appreciate some training, but for whatever reason are unable to get it right now. That’s the space that we play in.” Skyfit has raised about $1.5 million in funding.
CycleCast streams audio fitness classes for stationary bikes through its app. LiveRowing has taken one of the oldest exercise devices, the rowing machine, and enabled users to race one another and to connect to a community of rowers through the company’s app. The Pear Sports app syncs with a heart-rate monitor, and in-app trainers tell users when they should push themselves or slow down. The company has raised nearly $6 million in funding, according to the market research firm CB Insights.
Pear Sports sells a Bluetooth heart-rate monitor, although most of these companies are not selling hardware, technology and content the way Peloton is. But Mr. Foley knows that he will not be without competitors for long. Executives at SoulCycle have previously indicated that they are interested in joining the marketplace.
“We are running scared thinking that other people are going to get into the category,” Mr. Foley said. “We know it will happen. Whether it happens next year or two years from now and whether it’s two or three competitors or 10 competitors, we don’t know.”