Opinions expressed in this piece are solely those of the author and do not represent the views of S&P Global Market Intelligence.
Whatever shape you are in (or out of), odds are you have heard of, seen or maybe even tried a vigorous workout on a Peloton-networked stationary bike or participated in a calorie burning Latin dance-inspired Zumba workout.
Both crazes are having an outsized impact on the American fitness industry, which served 57.3 million in 36,540 health clubs and generated $27.6 billion in 2016, according to the International Health, Racquet and Sportsclub Association (IHRSA).
Although Peloton and Zumba will likely generate in aggregate under $500 million in 2017, they are significant because of their media-driven brand and social-media footprint. They also have more of a vertically driven business model than your average gym. Here's a profile of each, including their economics and following.
Bishop Cheen, retired managing director and senior analyst for Wells Fargo Securities
Venture capital-backed Peloton Interactive Inc. is an indoor cloud-networked cycling company that makes proprietary stationary bikes ($1,995) with mounted video tablets, which feature workouts and road-bike simulations and a network of instructors. Users pay $39/month to participate in unlimited virtual group rides or individual 30- to 90-minute cycling workouts.
* Ownership is headed by co-founder and CEO John Foley, a tech veteran and cycling enthusiast. The company has raised $450 million in five rounds since 2012. The latest round gave Peloton unicorn status with a $1.25 billion valuation, according to numerous published reports including a story in May by Business Insider.
* Following: Peloton had 100,000 subscribers at the end of 2016 and is expected by management to double that in 2017. Peloton produces 12 hours of live video content daily and sells its bikes through its own retail stores and online. There are 86,400 Peloton followers on Instagram, many of which also purchase licensed Peloton fitness apparel and accessories. The company claims a monthly subscriber churn rate of only 0.3%. In contrast, gyms and health clubs retain only about seven out of 10 members annually (about a 2.5% churn rate), according to IHRSA.
* Economics: Although still unprofitable, the company generated about $170 million of revenue in 2016, almost tripling its estimated $60 million in 2015, according to a June Wall Street Journal story, which cited Peloton CFO Lisa Klinger. Monthly memberships account for about 20% of Peloton's revenue in 2016. Instructors earn 3x to 4x the market rate, plus bonuses. Investors believe Peloton is on deck for an initial public offering in 2018.
Privately held Zumba Fitness LLC, meanwhile, was cofounded in 1999 by Colombians Alberto Perlman and Beto Perez. They established a Zumba training center in 2003 in Miami but purposely kept the origin vague, according to a recent feature in Quartz. The actual name Zumba does not mean anything — it's just a name they came up with, like "Häagen-Dazs" ice cream.
* Following: About 100,000 annually licensed instructors lead 15 million Zumba enthusiasts weekly at 200,000 locations, including small church groups, gyms and large outdoor festivals. Zumba has nearly 655,000 followers on YouTube LLC, which hosts 100-plus Zumba videos and 26 music playlists, including pop music stars Daddy Yankee, Pitbull, Luis Fonsi, Shaggy and Wyclef. Zumba.com is the online hub for all things Zumba, including licensed apparel, social networking, events and annual five-day cruises for 7,000 fans. Zumba has 783,000 followers on Instagram.
* Economics: There is not much detailed transparency except for a late 2012 profile in Inc Magazine, but I have been able to cobble together other published updates to estimate that Zumba generates close to $150 million of annual revenue. Here's how:
Instructors pay about $250 annually for licensing, or about $25 million, and pay a membership fee of about $35 a month, which would equal $42 million. Zumba sells at least 3.5 million units of licensed apparel at about $35 each (just my guess based on $30/unit in 2012), or about $61 million at a 50% margin. And I estimate another $20 million in various other revenues from licensing music, videos, cruises, festivals and Zumba's annual ZIN Convention. Instructors keep all the revenue they charge for classes and are bonused about 5% of apparel sales to their students. The company spent over $50 million on advertising in 2012 and is still very active, especially on social media.
My challenge: I plan to attempt both a Peloton ride on a friend's bike and a Zumba class this month and will let you know how I fare. I suspect Zumba may be a lower hurdle than Peloton if I opt for the Zumba Gold class. It's designed for seniors.