Hybrid enablement via cloud studios
Opinion piece on how cloud studios can empower the long-tail of fitness & wellness creators
Hey there! I’m Jordan Pascasio, Investor at Next Ventures.
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Last month, I tweeted out a thread on how the growing importance of production quality in digital fitness will drive innovation in the long-tail of creators in the space. A few folks reached out saying that the framework was helpful so I’ve decided to turn it into a long-form piece. The inspiration for the original thread came from a Fitt Insider article that examined how the largest fitness players (e.g., Tonal, Apple, Xponential) are building state-of-the-art production studios to enable high-quality content creation at scale and to adapt to evolving consumer expectations. Today’s fitness consumer has come to expect Peloton quality content and nothing less. A lack of production quality can have negative effects on a user’s engagement and retention, which is only exacerbated further by the increasing saturation of digital fitness applications and connected hardware experiences.
With industry incumbents deploying significant amounts of capital to stand up these production studios, the long-tail is forced to come up with new innovative ways to sustain market share. No one wants to pay for a workout in which the instructor is teaching from their living room with poor music + mic quality and while their small child is running around in the background (no joke I came across this scenario recently when testing a digital fitness platform). Sure, affinity for a particular instructor can outweigh a lack of production quality, but high-quality content production needs to be a priority somewhere on the roadmap in order to appeal to the largest possible addressable market long term. Expecting the majority of instructors on a platform to purchase professional-grade equipment and to renovate rooms in their homes is not scalable. So what can the long-tail of fitness creators who are currently distributing their content on platforms such as Talent Hack, arketa and Moxie do? I believe the concept of cloud studios that serves fitness & wellness creators can empower the long-tail, enabling the segment not only to produce high-quality content that consumers expect, but also to unlock IRL monetization (i.e., hybrid) from local customers and followers.
Overview
A fitness & wellness cloud studio is a brick and mortar location that offers short-term rentals of public and private spaces that creators can use to record content, host group classes or conduct 1-on-1 coaching. In order to cater to these use cases, the spaces are outfitted with professional-grade production equipment (e.g., camera, mic, software), workout equipment (e.g., spin bikes, weights) or tasteful open decor that’s perfect for yoga or meditation. For those familiar with the beauty space, think Salon Republic for fitness & wellness. For those not familiar, Salon Republic operates locations up to 20,000 square feet with space for up to 200 independent hair stylists to run their own practice (more on the salon suite model later).
The cloud studio model unlocks hybrid monetization for various types of fitness & wellness creators in two meaningful ways:
1️⃣ Accessibility to high-quality production
As stated earlier, the bar has never been higher for fitness & wellness creators to churn out high-quality content. For digital-first creators, producing live-stream and VoD content is the entirety of their business. For studio-first creators (e.g., Barry's instructors), producing digital fitness content gives them a viable side hustle.
A cloud studio equipped with professional-grade production equipment such as mounted cameras, wearable mics and editing software provides creators with a turnkey way to level up their content (i.e., short time-to-value). Creators can choose to drop-in and book a space for 30 minutes or to pay a weekly or monthly rental subscription to access the cloud studio on an uncapped basis. Sure, the option to purchase the production equipment outright may be cheaper than if a creator leverages a cloud studio for an extended duration, but then you’re still recording from your home. And unless you’ve decided to spend additional money to renovate your home to look like a modern fitness studio, then you’re just using your fancy equipment to record classes from the living room again - and potentially with your kid still running around in the background. In theory, the expense to rent the cloud studio space will be offset by the increase in content quality, which should help to decrease CAC, increase retention and ultimately boost customer LTV.
However, access to equipment doesn’t solely drive the increase in production quality. A live-stream or recording may look crisp, but the actual workout content needs to be engaging and evergreen. Digital workouts lack the spontaneity that IRL classes provide. I can take an IRL studio class with the same teacher and that targets the same muscle group multiple times, but the variability in music, classmates and coach narrative helps to always keep it feeling new. Repeat content in digital fitness is a motivation killer. The beauty of renting space alongside a broader community of independent workers is the aspect of community. It’s why concepts such as salon suites, co-working spaces or co-living spaces have found success in the past decade. Humans, and especially creators, value mindshare. The most recent example of this is the emerging concept of content houses. Up and coming TikTok creators have proven that putting talented individuals together in an aesthetically pleasing location or home leads to great content creation (e.g., Hype House). Heck, the Hype House crew even has their own Netflix show now! Cloud studios have the ability to cultivate a community of creators that can draw inspiration for new fitness & wellness content from one another, whether that be new music, movements or class structures. This can happen through organic connection within the space or through organized educational sessions hosted by the cloud studio operator.
2️⃣ IRL monetization
Leveraging cloud studios to host IRL classes allows creators to increase their overall monetization in two ways depending on creator type:
🦾 Digital-first creators
Cloud studios give digital-first creators a place to monetize their local following through a new channel while helping to build a more human connection with said followers at the same time. For example, this is Alexis Fischer, or more commonly known in her corner of the fitness world as lexfish:
What started as a 15 min IGTV workout video while in quarantine has manifested into a fully fledged digital fitness & wellness business today. Alexis, who lives in Southern California, started out by producing free content on IG to grow her audience. Upon reaching critical mass, she leveraged arketa’s software to monetize said audience via live classes, VoD and most recently a native app. While her digital-first business is coming along nicely, offering an IRL class once a week at a SoCal-based cloud studio would allow her to further monetize her local followers and to build a closer relationship with them at the same time. Increased human connection = better retention. Super fans would certainly have a higher willingness to pay for an opportunity to meet Alexis and take a class with her IRL, creating a new, augmented monetization channel for her going forward.
💪 Studio-first creators
The fitness studio model tends to limit the take-home pay for creators/instructors by paying out a flat rate per class regardless of attendance. While some studios are shifting to pay per attendee, the main takeaway is that studio instructors have to split the pie many ways.
The cloud studio model provides significantly more upside by allowing creators/instructors to keep 100% of class booking revenue while only having to net out the fixed weekly or monthly rental expense for the space. One of the risks of this model is that it requires creators to already have an established following to migrate over and monetize (i.e., they eat what they kill). However, while studio-first creators tend to have marginally smaller followings than digital-first creators, their followers tend to be localized, highly-engaged and fiercely loyal given that it was originally cultivated IRL.
A helpful analog to crystallize this concept further is the difference between the traditional salon model (i.e., minimum wage + marginal commission) and the salon suite model that a company such as Salon Republic provides (i.e., keep 100% of service revenue that you bring in net a fixed rent expense). Companies like Salon Republic and Sola Salon have disrupted the beauty industry by enabling independents to create their own self-sustaining businesses and to keep a significantly higher portion of their service revenue. Similarly, cloud studios have the potential to disrupt boutique studios (e.g., Soul, CorePower) by enabling their best creators/instructors to run the same playbook.
Think of this concept as an IRL extension of what’s going on within the digital world and the disaggregation of work. A new generation of creators and independents are leveraging web3 to rid of intermediaries who have traditionally monopolized value and to connect with consumers directly, meaningfully increasing creator agency and monetization. Instead of a centralized platform (e.g., Facebook/Meta) owning and profiting from user-generated content, everyday people gain from their own creative efforts.
In an effort to abstract away any complexity pertaining to the models described above, here is a visual representation of the value drivers by creator type:
Real life examples
While still a relatively nascent concept, there are a handful of companies leveraging the cloud studio model today across two distinct models:
Ecosystem partner model example: Maverick Community
Maverick Community is a cloud studio based out of Los Angeles. Notably, the company leverages a business model built upon management agreements. This capital light approach is better suited to accommodate short-term leases/rentals that can be more unpredictable during times of economic uncertainty. More info on management agreements here if interested.
Maverick has seen rapid growth in creator utilization since opening, averaging eight group classes and five private sessions per day. Notably, the cloud studio’s creator base has grown 100% organically to date.
“When creators post event notifications or videos of IRL classes on social media, other creators in their network see the tagged content, see the quality of the workout and inquire further about the space”
- Michael Fishman, CEO & Founder of Maverick
Using the salon suite analogy again, this WoM effect is the reason why Salon Republic installs social media walls and ensures a perfectly-lit space for stylists to capture images of their work for sharing on social media - it’s a very effective and cost efficient creator acquisition hack.
Maverick’s strategy is to be an agnostic ecosystem partner for creators across fitness conscious locations such as LA, NYC or Miami, fostering a win-win-win relationship for the three major stakeholders involved.
In-house model example: Moxie
Digital fitness startup Moxie facilitates a fitness marketplace, connecting both the supply-side (creators) and the demand-side (fitness consumers). After hearing recurring customer requests for more high-quality content, the company launched a group of experimental cloud studios in the Delmarva region to enable high-quality video production for local Moxie creators and IRL classes for local Moxie members. This allowed local members to train with creators virtually and IRL all under the same subscription plan.
So far, the results have been encouraging for Moxie, adding meaningful incremental revenue to its top line and unlocking a true hybrid solution for its Delmarva members. With significant unbundling occurring in the digital fitness & wellness space over the past year, this is an interesting reverse approach in which the company is bolting on cloud studios to an existing digital-first fitness platform in order to drive more content liquidity and to create new revenue streams. The company hopes to scale this model over the next few years, expanding its cloud studio coverage to major metropolitan hubs.
Final thoughts
As new distribution channels and forms of fitness & wellness experiences continue to expand, it will be interesting to see how the creator long-tail fares in the land grab for the growing demographic of ‘active’ consumers. The fitness & wellness industry is very much much driven by grassroots efforts, underscoring the need to provide innovative solutions for everyday creators. While cloud studios present a compelling lever to increase content quality and to unlock hybrid monetization, upstream solutions such as vertical SaaS and social media platforms (i.e., top of funnel) are critical pieces to the creator enablement puzzle as well. I’m excited to keep an eye on the development of cloud studio applications within fitness & wellness and I hope that the concept can disrupt the space in a similar manner to how salon suites, co-working and co-living companies disrupted their respective status quos.
If you are building or investing in the fitness & wellness space, I’d love to chat! Please reach out to jordan@nextventures.com, or I can be found here.
thoughts on inter-connected network of creator studios in nomad-friendly cities? LA, Austin, NYC, etc.
Thank you for the shout out, Jordan! Great piece.