Each month, I pay $99 to a company called ClassPass for the luxury of taking an unlimited number of fitness classes in and around Brooklyn, where I live. In the depths of this winter, regular exercise — a key to calming my hyperactive and anxiety-prone brain even when it’s less awful outside — has become crucial enough to maintaining my sanity that I find myself prioritizing my ClassPass bill over other splurges, like ordering in, taking cabs and expensive nights out.
I’m a relatively early adopter of ClassPass — I signed up last October — and so far, it’s kind of a dream. Memberships to a single yoga, Pilates or spin studio can cost as much as $200 or $300 a month, or upward of $20 for an individual class. A monthly membership to ClassPass costs $99 in New York and offers access to a multitude of gyms, studios and meditation classes in each city where the company operates (though some of the biggest brand names in fitness, like SoulCycle and YogaWorks, seem to have opted out). Most of my favorite yoga studios have classes on the service, and I’ve begun dabbling in kickboxing, indoor cycling and rowing for a fraction of what I would pay otherwise. Like Uber, Instacart and Seamless, ClassPass offers a considerable leap in efficiency and convenience, paired with a price cut that seems too good to be true.
But just as I try to be a conscientious consumer who buys organic food and recycles, I’m working on being mindful of the larger economic and environmental impact of the software and apps that I use. Are the studios that work with ClassPass able to do it sustainably? Or does the service push the limits of their business model?
While attending classes, I’ve picked up on notes of tension between the company and its partner studios. It’s not uncommon for instructors at individual studios to implore ClassPass users to sign up for regular packages and become members — an unlikely proposition for people who are already paying $99 a month to ClassPass. It’s normal enough that they would want to up-sell newcomers, but the urgency and undertone of desperation in their voices signal something else afoot in the financial realities of their partnership.
ClassPass pays studios a set amount of money for each class that is booked through its systems. It declined to give me specifics on how that rate is determined. Two of the owners of a studio that I frequent, however, were willing to talk. Ashley Lively and Karla Misjan run a clean and cute boutique gym called SyncStudio, which offers cycling, yoga and strength training. Since working with ClassPass, they’ve seen an influx of new customers, me among them.
“The biggest appeal is marketing,” Lively told me. But because most of their new customers come through ClassPass, she said, they’re less likely to sign up for SyncStudio’s $175 monthly membership. For each class booked through ClassPass, the company pays less than the studio’s $18 drop-in rate. “A full class running at half the cost doesn’t make you money,” Lively said. “Sometimes, the economics don’t make sense.”
ClassPass marks the latest advance of the Internet’s middleman economy, which is progressing ever deeper into the territory of brick-and-mortar businesses — a process that began almost two decades ago with Amazon and shows no signs of stopping. Joshua Brustein described the dilemma this poses in a 2013 Businessweek article about Seamless, the food-delivery service: “A start-up comes up with an idea to leverage the Internet to increase customer choice or convenience, skimming a healthy portion of the profits with a fraction of the overhead. People listen to more music, get more massages, have access to more classified ads. But as it gets easier to sell things and offer services, some businesses find it harder to make money doing so.”
Businesses like restaurants, bookstores and exercise studios already operate on thin margins, and their relationships to digital middlemen like ClassPass can quickly become untenable — especially because most intermediaries take a commission and may also charge for advertising and processing credit-card transactions. The power imbalance is worsened by the winner-take-all tendencies of the Internet economy: As companies like Amazon, Uber and Seamless have grown, it’s increasingly difficult for their suppliers to push back on onerous terms.
Already, ClassPass is cornering its market. In February, the company booked 600,000 reservations through its service; last year, that number was closer to 10,000. The company now operates in 28 different American cities, employs more than 100 people and offers classes from 2,500 different studios. In January, it raised $40 million in venture capital, bringing its total funding to $54 million.
“We’ve definitely lost a significant number of membership people to ClassPass,” Misjan told me. Lively added, “It’s more than direct competition — it’s fierce competition.” If ClassPass continues to grow in size, entire businesses could become dependent on it — and yet, resisting it already seems futile. “That’s like going back to sending letters because you decide you hate email,” Lively said. “They’re not going anywhere.”
ClassPass does let studios decide which classes they list through the service, allowing studios to direct users to time slots and days that might otherwise go empty. Lively told me that ClassPass is better than Groupon, at least, in that the company makes a point to listen to her frustrations and grievances and respond when it can.
Payal Kadakia, co-founder and chief executive of ClassPass, says she is working to figure out how to build a more sophisticated pricing system that benefits both the studios and her company. She said the company’s recent decision to raise money was in part an effort to not have to raise its own prices or reduce the amount it’s able to pay out to studios. “It’s not just about discounted pricing but making sure each of these studios is growing,” she told me. “We don’t want to cannibalize their loyalists.”
In general, Silicon Valley likes to argue that middleman services offer customers, jobs and opportunity where there were none before. O.K., sure. But that argument often glosses over the human costs associated with convenience. Those of us who use these services the most are often the blindest to their potential consequences.