How big could Apple Fitness+ become?
Apple launched Fitness+ in December 2020 and looks set to take a large piece of the home fitness market.
Introduction
Apple Fitness+ launched in December 2020 offering guided activities using a compatible Apple Watch to capture progress and provide real time feedback. The app features activities such as cycling, dance, HIIT, mindfulness, core, rowing, strength, treadmill and yoga.
Certain workouts require dumbbells, exercise bikes, rowing machines, treadmills, yoga mats and blocks. Whilst you could complete these activities in a gym, given the current Covid restrictions, the home environment is a key focus for Apple.
Close the rings
One of the gamifications elements of the Apple Watch is to the complete your individually assigned goals; movement, exercise and standing. You can use Apple Fitness+ to close the rings and complete the goals. This visual element is included within any Fitness+ activity:
Who is the target customer?
Apple’s current Fitness+ activities last a maximum of 45 minutes. Each has an option that allows simplification of an activity, making it easier if you’re struggling to complete any of the elements. Fitness+ is aimed at people at the start of a new wellness journey or more casual fitness enthusiasts. We can draw parallels to when the Apple Watch first launched. It didn’t have some of the prerequisite features that an avid runner required e.g. GPS and more in-depth running metrics. Apple Fitness+ is similar in that it targets customers with more basic needs and requirements. It will steadily build capabilities to suit more evolve member needs, but to start with its looking to attract more casual fitness users.
Time to Walk - Podcasts with activity
One feature that does seem unique and innovative is “Time to Walk” that offers something new and exciting versus other platforms. The ability to listen whilst walking with celebrities voice overs and music, featuring Shawn Mendes, Uzo Aduba, Draymond Green and Dolly Parton. Apple is adding new episodes on a weekly basis until April 2021. This is another excellent value add for the more casual fitness customer.
Steve Jobs famously loved a walk and talk meeting and this is definitely a nod to that.
So what’s the potential?
Fitness+ is compatible with Apple Watch 3 and above. I estimate approximately 30 million customers of the 102 million Apple Watch install base won’t be able to get Fitness+ due to models that aren’t compatible. However, 72 million is still a significant opportunity to drive additional revenue from.
Apple Fitness+ serves two purposes; grow service revenues and increase Watch adoption, whilst retaining existing Apple Watch customers. It advances the Apple Watch ecosystem, offering a service that appeals to the masses at a great value price point.
Above Avalon asserts at the end of 2020, approximately 10% of iPhone users were wearing an Apple Watch. There’s a nice waterfall happening here. Apple is increasing its iPhone install base by offering other hardware products that compliment it and add to the ecosystem. It then layers in additional software value that adds to those products e.g. Fitness+ to unlock additional customer value and increase stickiness.
If Apple can covert 5% of its 72 million compatible Watch customers to Fitness+ it’ll add an additional $430 million per year in revenue.
Whilst it’s unlikely to add such a significant number initially, it doesn’t seem inconceivable long term, given the likely improvements to the service. Even at 2.5% conversion it’s still over $200 million per year in revenue. It’s also likely to be a seriously profitable part of its business.
Pricing comparison
By comparing Apple’s pricing with its competitors, it is by far the cheapest service of its kind. Apple’s 73 million compatible Watch install base provides instant scale and its priced Fitness+ aggressively to drive adoption. Apple is also offering a free 30 day trial to existing Watch owners and 60 day free trials to new Watch customers. A great way to capture interest among its base.
Apple does also compete with free alternatives too, like YouTube with its vast content library but also Nike Training Club (mentioned later).
Distribution partners and promotions
Apple has a huge opportunity to leverage its existing relationships with wireless network operators to further increase Fitness+ adoption. Apple has already used this channel, offering wireless operators the ability to bundle Apple Music for extended free periods. Apple uses Music to encourage sales of its hardware. Apple can use Fitness+ in exactly the same way to encourage Watch sales.
Instructors a key battleground
From my survey on Peloton members, it’s clear just how important instructors are to a successful fitness offering. Peloton is leading the space with 38 instructors. Apple Fitness+ is significantly behind with just 20. Apple has 11 male instructors and 9 female. Peloton has 14 male instructors and 24 female. This might reflect Peloton’s membership; where it has has more women then men and caters for it predominantly female membership.
Instagram following per instructor
Instagram’s influence to the fitness industry is well documented and having instructors that have a strong following helps build your brand. When looking at Peloton’s total following across all instructors you see just how big its reach is. Of course Peloton has almost double Apple’s instructors, so this isn’t a fair fight.
However, looking at median followers, Apple is significantly outgunned by Peloton:
Peloton’s instructors are all heavyweights on Instagram. Apple’s by comparison have some instructors with just a few thousand followers.
Comparing the most followed instructors on both platforms also shows a significant lead for Peloton.
Robin Arzon from Peloton has almost 10x the following of Sherica Holmon. Could Apple throw some significant money at the problem and convince some of Peloton’s instructors to join them? Maybe. But when reviewing Peloton instructors Instagram profiles you realise just how bought into the platform they are. Loyalty of course has a price and it is widely rumoured that early Peloton instructors were offered long term incentives in the form of share options. Given Peloton’s increasing share price it’s conceivable there might be some millionaire Peloton instructors.
Influencers build your brand awareness
Peloton’s huge reach on Instagram provides an additional marketing channel that drives significant brand and product awareness. It also drives stickiness with its customers by creating a direct link between members and instructors. Peloton’s median instructor follower count far exceed Apple’s. But perhaps Apple’s partnership with Nike will bridge the gap.
Nike partnership
Apple’s relationship with Nike has existed since May 2006 when they first worked together on an iPod integration. Nike is featured heavily in Apple’s marketing with its instructors and members wearing Nike apparel. Nike has a rival application called Nike Training Club. It’s a free app that includes Yoga, Cardio and HIIT, strength training and mobility. Nike’s intent is similar to Apple’s; it wants to build stickiness and sell shoes and clothing. Nike’s Fuelband was one of the first wearables but Nike opted to end the product line, instead collaborating with Apple on the Watch. You sense that Apple Fitness puts the two companies in direct conflict. The two applications and goals are very similar. Perhaps Nike will again let Apple lead and even support with heavyweight sportspeople such as Serena Williams and Cristiano Ronaldo. That would certainly change the table stakes against rivals such as Peloton.
It’s not inconceivable that Nike could build connected fitness equipment that will work for Fitness+.
Imagine a Nike bike, rower, treadmill that seamlessly integrate with Apple Fitness+.
That could further enhance the partnership between the two icon brands.
Apple Music integration
One area Apple does have a significant edge over Peloton is the seamless music integration. Apple Fitness+ customers can download and stream music from their workouts.
Summary
Apple Fitness+ is priced lower than all of its closest competitors
Apple has an estimated 72 million compatible Watch customers to target
Fitness+ could add an additional $430 million per year in revenue if it hits 5% adoption. Even at 2.5% conversion it’s still over $200 million per year
Instructors are extremely important to fitness apps. Apple has fewer instructors with less followers than its competitors
Apple’s partnership with Nike could further enhance Fitness+
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