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305 Fitness CEO: 'We have two new revenue streams that we didn't' before the pandemic

305 Fitness Founder & CEO Sadie Kurzban joins Yahoo Finance Live to discuss the state of the fitness industry amid COVID-19, Omicron concerns, and how their at-home subscription is booming at this moment.

Video Transcript

- Welcome back, everybody. Getting fit is a popular New Year's resolution. But the pandemic has changed what it means to work out for many of us. Here with an outlook for the fitness industry and some tips on how to get in shape in the new year is 305 Fitness Founder and CEO Sadie Kurzban.

Sadie, great to have you here. And happy New Year to you. I know that like a lot of folks in your industry, you had to pivot during the pandemic to at home workouts. Just curious what business looks like for you here early in the new year.

SADIE KURZBAN: I would say due to the Omicron variant and due to the fact that most of our volume is in New York and DC, pretty liberal and cautious markets around COVID, it has been pretty rough the last few weeks. It looks like we are not going to get that big January rush when it comes to in-person fitness in our studios.

However, we're seeing our digital platform grow once again. And it seems like these different levers of our business, whether it be virtual or our certification program or our studio business, were able to turn on and up and off depending on what COVID conditions look like.

- And thank you so much for joining us today. And I just want to get your take on what does the future look like? Has the fitness industry changed permanently now? Do we move away from people coming into classes? Is it more subscription based? Do we see more outdoor fitness exercise opportunities out there?

SADIE KURZBAN: I would say it's really hard to tell. There is a lot of money right now. There is a lot of hype when it comes to virtual fitness. However, I wouldn't say that consumer behavior has actually radically shifted. If you look at actual usage of brands like Peloton, if you look at actual human happiness, how many calories people are burning on average, how many steps people are taking on average, all of that is lower than it was before the pandemic.

So in terms of adoption, virtual fitness, yes, more people have adopted it than ever before. In terms of will this be the future, will this always be here to stay, do people actually prefer it to working out in person, I think that's a really mixed bag. And time will tell in a couple of years when we get out of this what it really does look like.

- Wow, a couple of years. I think we've all resigned ourselves to that having to be the situation. But Sadie, for your business in particular, for those who don't know, you have high intense dance cardio workouts. And I know that during this time you came up with an at home subscription model. What does that look like for you in terms of revenue?

I know you had to shut down your Boston in-person studio during this time. And I'm wondering if you're going to have to shut down any more in-person studios. And are you going to focus more at home workouts, especially if that subscription service is really bringing in the revenue for you?

SADIE KURZBAN: Right now we are definitely focusing on the virtual platform. It's something that we launched in the pandemic, like many fitness studios did. I would say in terms of the scale and size, it doesn't quite compare to what we were able to do before the pandemic with our studios. That's because these are very different businesses.

A subscription business is a low price point, and it's all about mass scale when it comes to building a big business, whereas our in-studio business was really about a higher price point and having fewer people do it, but do it really regularly. So while we are able to turn on this virtual platform, I wouldn't say that we're driving the same amount of revenue and profit that we were before the pandemic.

However, we have two new revenue streams that we didn't. We were forced to pivot like so many businesses did. And now we do have the capacity to be able to be in people's living room through 305 at home, as well as a train the trainer model. It's our instructor certification program.

And much like Zumba or Crossfit, we give the tools, the format, our winning formula, our DJ mixes, to dancers and to aspiring fitness instructors who want to go out there and lead 305, whether it be from Zoom to their friends and family online, or whether it be in-person, perhaps in markets that are more open right now than our markets in New York and DC.

- And then what are the biggest headwinds you think you face going into next year?

SADIE KURZBAN: For sure I definitely think that fears around COVID is a big one. I would say we were one of the first businesses to close in New York City. We were the first fitness business to close in all of New York City. And the data was so serious in March 2020 and in all of 2020.

Now that we have a vaccine and now that we've been able to see the data, it really comes more down to consumer perception and consumer comfort and what people want to do, what they feel safe doing. So right now it is a wait and see approach for our business.

We are waiting for people to feel comfortable. We are hoping that they do soon. But in the thick of all of this Omicron variant, we're definitely just keeping our toes and fingers crossed that soon people are going to feel comfortable to come back.

- All right, Sadie Kurzban, Founder and CEO of 305 Fitness. Thanks for joining us, and all the best to you in the new year.