WeWork wants to make its business look more like cable TV than real estate

Can WeWork convince businesses to turn to it for more than office space?
Can WeWork convince businesses to turn to it for more than office space?
Image: Courtesy of WeWork
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Before becoming WeWork’s COO in 2015, Artie Minson was the CFO of Time Warner Cable.

The jump was, on its surface, odd. Not only had Minson given up an office with a picture-window view of New York’s Central Park to work at a startup, but it was a startup that seemed to have little in common with the cable TV business. WeWork, which operates more than 135 locations in 14 countries, essentially does rent arbitrage: It signs long-term commercial leases, divides the space into tiny offices, and rents them, month by month, at a premium.

But in a February 2016 interview, Minson told me that his vision for WeWork involved a business model that does look like a cable company. He called it  “programming for real estate.” Today, WeWork launched the first iteration of a platform that enables the idea.

Cable companies don’t make TV shows—they build infrastructure. But they make their money selling subscriptions to the TV shows that their infrastructure allows you to watch. WeWork rents office space to entrepreneurs and companies, but it aspires to package and sell the services they need to run their businesses from that office space.

“Today, we have space services,” Minson said. ”We have printing, phones, wifi.” A good way to understand where WeWork might attempt to expand next, he said, would be to think, “‘What support services do people need?’ Travel, software, life services? Do they need credit card, banking, wellness, education, services? They could need help with insurance, payroll, digital and so on.”

“We’re going to build some of this,” Minson said. “We’ll buy some of it, we’ll create a platform, and we’ll partner.”

That platform is an app store, currently available only in the US, through which members can purchase more than 100 services, including Office 360, Slack, and Avis car rentals, often at a discount. It is similar to a library of discounts that already existed in WeWork’s members’ app–but with a better interface and one potentially significant change.

For products offered by a handful of its partners, WeWork will bill members directly. In the way that a cable subscriber might add HBO to her cable bill, WeWork members can now sign up to have services such as Upwork freelancing added to their monthly WeWork invoices.

At launch, the services store is a relatively modest effort focused specifically on software for businesses. There’s no evidence that WeWork members actually want to buy other types of services from WeWork (a spokesperson declined to provide the number of members who use its current discounts), and many of WeWork’s partners have not opted for the “fully integrated” version of the partnership, in which WeWork handles the billing.

“The digital services store is a step,” says WeWork cofounder Miguel McKelvey. “But it’s also an indicator of where we’ve headed in terms of growing our business and extending it. It’s important symbolically.”

Establishing a successful subscription store for business software and other services would be an important step for WeWork. Critics have argued that the company’s massive $17 billion valuation—which according to the Wall Street Journal is among the top 10 of all venture-funded companies—is inappropriate for a private office-space rental company. Though WeWork has recently expanded into ventures like housing and facilities management, its answer to these critics has long been that the company can extend its business beyond office space by offering other services to members.

Acting as a sales conduit to small businesses isn’t an entirely new model. Companies like Zenefits and Stride Health, which provide a human-resources platform for small businesses and an insurance shopping website for freelancers, respectively, have built businesses by collecting commissions on insurance sales. WeWork could similarly collect fees for providing small-business services with sales leads. Its current partners have different arrangements with WeWork. Many have discounted their services in exchange for placement in the store and access to WeWork’s more than 100,000 members.

WeWork also offers a $45-a-month membership, called “We,” that doesn’t include access to a physical workspace but the option to book it for $50 a day. WeWork’s vision of becoming a one-stop shop for discounted business needs, ranging from gym memberships to payroll to benefits, could—though it’s a far-off goal at this point—potentially make the We membership more appealing. (A spokesperson declined to say how many members currently pay to be “We” members.)

As long as its core business is focused on small office rentals, WeWork is vulnerable: Its members could move to cheaper real estate if prices fall, or to coffee shops during a downturn, leaving WeWork holding expensive long-term leases that it can’t afford. The deep discounts offered in the services store are intended to make WeWork more appealing and reduce churn. ”The more people feel that they can get from WeWork–that they can get that ‘business in a box’ solution–the more people are attracted to WeWork,” Minson told me last year. “And then when people come to WeWork, they’ll feel like, why would they ever leave?”