ClassPass, the subscription-based fitness marketplace recently valued at $1 billion, is today announcing that it has been acquired by MindBody.
mind Body It’s like the OpenTable of the fitness world. Its booking software is used by studios, gyms and other experience-based service providers – the company recently signed a global deal with Blow Blodry Bar, for example – for clients and organizations to book their appointments, To book classes etc.
ClassPass helps fill classes, while MindBody provides software that helps fitness centers run their businesses.
Terms of the deal were not disclosed, but Mindbody CEO Josh McCarter said it was an all-stock deal. Along with the acquisition, Mindbody is also announcing that it has secured a $500 million investment for the merged entity, led by Sixth Street.
ClassPass launched back in 2012 with a model unlike Mindbody’s current model. Founder and then-CEO Payal Kadakia envisioned a site that would let you book classes la carte from a variety of studios and gyms. Turns out, people weren’t as motivated as they had hoped.
Through a series of iterations, classpass Moved to a subscription model, allowing users to pay for a monthly subscription that would let them access a specific number of classes across a spectrum of fitness styles.
Over time, high-usage customers were being subsidized by low-usage customers. Meanwhile, their different classes and instructors were being treated equally in the studio and gym, whether a class was with a popular instructor or during peak hours.
This led ClassPass to introduce virtual currency and convertible pricing. This allowed studios to price their classes based on a handful of factors, and ensured that customers were paying for what they were using.
Once the company found that footing, it was out of the race in terms of growth. A major international expansion began with a massive funding round led by Temasek. The biggest hurdle since then has been the pandemic, which has hit gyms and fitness studios especially hard.
But McCarter and ClassPass CEO Fritz Lanmann told Nerdshala that all of their data points to a high demand for in-person fitness classes and experiences.
With the combination of forces, the Mindbody/ClassPass unit has huge growth opportunity. ClassPass studios that aren’t using the booking software — Lanman says that’s about one-third of the studios on ClassPass — will now have the chance to sign up with MindBody.
Mindbody’s consumer-facing business will have the chance to double down on their experience and gain access to those studios by signing up for a ClassPass membership. And, of course, gyms and studios that use MindBody for a la carte booking can also be sold to ClassPass.
Lanman and McCarter insisted that gyms and studios on the ClassPass network would not be required to use MindBody, and vice versa.
“That’s because we think it’s important that ClassPass maintains its advantage of having as much inventory available in a particular market as possible,” McCarter said. “That means they need to work with businesses that potentially have some of our competitors’ software on them.”
In other words, there will be no forced migration for any business from one software platform to another, and the same applies to the consumer-facing sides of the business.
ClassPass will keep its brand, and Lanman told Nerdshala that there are no redundancies or layoffs planned.
Lanman compared the deal to the Facebook/Instagram merger.
“Look at Instagram and Facebook,” Lanman said. “Instagram was only a small company when Facebook bought it, and Facebook really turbocharged it using the breath of its superior scale and services.”
The key, according to both Lanman and McCarter, is with multiple studios, gyms and service providers finding their way through the end of the pandemic.
“We are fortunate that most of our customers have been vaccinated,” Lanman said. But, of course people don’t want to make face masks, and in some places there is still a massive mandate. And so, the top complication of the risk to the business and execution is how many of these small businesses can we keep in the business. And how long can they hold? But we are seeing encouraging signs of resilience in the industry so far. “