Thanks for writing this. I’ve been with Classpass since 2014. As a person who came up with the ClassPass model in a business incubator in 2012 (but failed to secure funding to launch it), I intimately understand the nuances of this model because the main issue I struggled with is “how is this good for membership based studios?” The profitability looked great, all built on the backs of studio owners like ourselves. Classpass has almost zero overhead compared to the revenue they “generate” and compared to overhead as a percentage of a studio’s revenue. They are also investor funded, which means that shareholders are their top priority. In this pecking order, the studio is merely a host, to be kept alive, but barely enough to deliver service to clients. They have no reason that I can see not to undercut the market to the lowest common denominator as long as studios such as ours stay afloat. For example, as you said, we cannot and should not compete with their membership rates. That said, the inclination is there because when people purchase memberships, we get security. In the Classpass model, that power and security is gone.
The biggest issue I currently have, besides the fact that this “disruption” of the market gives a ton of pricing power to Classpass, is that they refuse to renegotiate rates based on current market prices. I am locked into a 2014 pricing agreement that was made when the platform was “a place for people to try out new studios to find out which one they love.” Now the messaging is that they are a place for people to experience variety, which of course works directly against our business model and clients best interests (which include adherence to programs to achieve long-term results and sense of belonging to a community). My drop in rates have increased substantially since then and so have my costs. Even with the dynamic pricing system, I’m being paid based on the 2014 economy and essentially losing around $24k/year.
It’s beginning to feel like a weird hamster wheel honestly. Being stuck in something to generate revenue that works against generating revenue. My hope is to generate enough actual revenue by February to only offer premium and at a basement that is my actual drop in rate. That way we’re not off the platform altogether, but people will have to actually pay a decent drop in fee to use our services instead of it being a discount. This way real costs are realized. If Classpass wants to offer access to premium services, they will have to pay for it.