SURVIVAL OF THE FITTEST

CrossFit’s extremely lucrative business plan is also deceptively simple

“I don’t understand CrossFit’s business plan,” my middle-aged friend said, looking up from the floor where he lay next to a barbell, panting in a pool of his own sweat. Like many of the former athletes, weekend warriors, and get-in-shape hopefuls who have flooded to this cult-like fitness program, my friend was caught up in the hype but still unsure how and why he was paying 10 times the cost of a traditional gym.

He’s hardly alone. As some of the “fittest people on Earth” converge on Los Angeles for the CrossFit Games, it’s hard not to admire what the fitness phenomenon has become. Over the last three years, CrossFit has tripled its number of gyms around the world and seen competitors increase 20-fold in its flagship five-week Open event—held at the end of February of every year—which winnows the field from hundreds of thousands to the final 40. These last men and women standing compete in the CrossFit Games, which began Tuesday, July 21 and will finish up on July 26.

Created by Santa Cruz personal trainer Greg Glassman 15 years ago, CrossFit’s strange fitness subculture offers an intense promise to new converts. With a background in gymnastics and an interest in weightlifting, Glassman was fixated on creating a fitness program that was measurable, observable, and repeatable with an engineer’s precision. The result has not only spawned nearly 12,000 small CrossFit-affiliated “boxes,” as the franchised gyms are called, but an entire sport: the so-called sport of fitness. Reebok, for one, has since bought into the idea, and Glassman now presides over the entire affair with FIFA-like domination.

Though not a tech company, CrossFit’s success is tied directly to the birth of the web era and the growth of mobile media. In the beginning, CrossFit gained converts by posting daily workouts on a no-frills website. It still does, but now those daily workouts are also mobile-friendly and broadcast to CrossFit’s 864,000 followers on Instagram. Super-charged by social, CrossFit has an Uber-like emphasis on letting its affiliates bear the capital costs while Glassman keeps the ideas and image of the sport tightly within his own grasp. Whether purposefully or through a fortuitous accident, Glassman’s diffuse, no-frills business model has transformed a bunch of fitness nuts lifting tires in their garages into a brand Forbes estimated is now worth $4 billion. And the juggernaut shows no signs of slowing down anytime soon.

The first key to Glassman’s success is his promotional prowess. CrossFit maintains a sophisticated video production operation in the Santa Cruz headquarters that exploits the power of social media and regularly pumps out a broad range of videos. Some are multi-part documentaries dramatizing the Games and the story behind each event. Others provide personal vignettes of CrossFit athletes that would make American TV sports legend Roone Arledge proud. Some of these videos simply document the proper technique for an exercise or Open event. Taken together, the video operation has created a pantheon of characters who epitomize CrossFit’s stated values of humility, self-challenge, and communal support.

 While social media may be the lifeblood of the CrossFit enterprise, its rabid participants are the beating heart of Glassman’s business plan But while social media may be the lifeblood of the CrossFit enterprise, its rabid participants are the beating heart of Glassman’s business plan. Many of the numerous CrossFit boxes around the world started in garages, as like-minded enthusiasts gathered to try their luck at the website’s daily workout. Those casual groups eventually sought out Glassman for training and legitimacy.

Which leads us to the actual money. Glassman’s privately-owned business makes its money in three ways: $3,000 affiliate fees for the nearly 12,000 boxes around the world; $1,000-a-head seminars for anyone wanting to be a CrossFit instructor or affiliate holder; and its lucrative Reebok partnership, which includes sponsorship of the games and licensed apparel. In 2012, CrossFit said it was grossing $40 million a year and predicted that that would double every 18 months.

On that trajectory, CrossFit HQ, the comparatively small organization that devises the workouts, trains the coaches, certifies affiliates, manages partnerships and, now, produces a great deal of original video content, could be making upwards of $160 million today. Such estimates—as a privately held company CrossFit does not have to disclose its financials—are based on the amount of money 12,000 boxes should be bringing in affiliate fees (up to $36 million a year) combined with training revenue. To keep pace with demand, CrossFit needs to train tens of thousands of new coaches a year. With 252 locations offering courses, certifications could bring many tens of millions of dollars more.

And that’s not including Reebok. Considering all of the Reebok shoes, shorts and sports bras that get sold, along with the television revenue from ESPN and the entry fees from the CrossFit games, a $160 million projection for 2015 seems achievable.

 Glassman’s original insight was to control what was important to him and let others deal with the rest.  Glassman’s original insight was to control what was important to him and let others deal with the rest. CrossFit may have made Glassman rich, but he’s left plenty on the table for everyone else, not just the shoe companies. Acting a bit like the Grateful Dead which famously allowed anyone to record their concerts and sell the tapes, Glassman has created a broad CrossFit ecosystem.

Another huge part of CrossFit’s appeal has been its ability to scale. For its maniacal following of military personnel, firefighters and team athletes, the jump from fitness lover to affiliate owner is not that difficult. Once a prospective box owner has completed his or her certification, the barriers to entry are quite low. CrossFit gyms are called boxes to emphasize their low-tech bias. Many are opened in former industrial settings, within garage or loading-bay doors for example, offering access to fresh air.

Start-up costs are so low, in fact, that few box owners took Reebok up on its offer to provide cheap financing in exchange for the Reebok name. Still, the economics of CrossFit make it unlikely that gym ownership will be a path to financial independence. Most boxes offer monthly memberships for somewhere around $200 per month with additional discounts for long-term commitments and for active military, police, fire personnel, and teachers. This means that a box owner with 100-150 members may not clear a six-figure income after expenses.

Benefits are another issue entirely. Many box owners, like my coach at Empire State CrossFit, Daniel Stearns, are former personal trainers whose income was limited by either the number of hours they could schedule or the wealth of their clientele. For those trainers, CrossFit’s class format—where they are no longer towel-toting cheerleaders—has been liberating as well as enriching.

 CrossFitters—whose first rule, it is often said, is never to stop talking about CrossFit—are eager to post their accomplishments on social media. Not to mention that the program’s emphasis on community has been a boon for its homegrown PR efforts. CrossFit box owners are rewarded for their mastery of social media. Like a multi-level marketing scheme, much of CrossFit’s training revenue comes from former students who want to open their own boxes. That growth has been good for Crossfit and great for the growth of the games. CrossFitters—whose first rule, it is often said, is never to stop talking about CrossFit—are eager to post their accomplishments on Facebook, Twitter and Instagram.

The sport has also spawned more than its share of Instagram stars: Two winners of last year’s games—Camille LeBlanc-Bazinet and Rich Froning—have 600,000 followers and over 450,000 followers, respectively. And Instagram has also made stars of some of the sport’s more photogenic but perhaps less accomplished athletes like Lauren Fisher (398,000 followers) and Brooke Ence (154,000 followers).

Today’s CrossFit athletes are sponsored by a wide array of equipment, apparel, and supplement manufacturers. These stars, in turn, employ a growing list of influential coaches and movement specialists. As “the sport of fitness” gains more adherents and hopefuls, websites, clinics, and seminars are multiplying into a virtuous cycle.

Sharing a messianic desire to change the world like so many of his tech entrepreneur peers, Glassman’s CrossFit is inseparable from the birth of our modern, decentralized media landscape. Its growth tracks the growth of social media and mobile technology, making CrossFit’s business both a platform for other entrepreneurs and a dynamic, lucrative ecosystem as a whole.

Follow Marion on Twitter at @MarionManeker. We welcome your comments at ideas@qz.com.

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