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Beachbody’s P90X Making Serious Money

Wednesday, 9 Jun 2010 | 4:32 PM ET

Get fit quick infomercial products and videos have been around for a long time. But it’s a safe bet that when we look back on the industry 20 years from now, P90X might be considered the gold standard.

Beachbody's P90X
Source: beachbody.com
Beachbody's P90X

In the last couple years, the 12-DVD workout program, which includes a nutrition and workout guide, has turned into a $200 million franchise, making up almost half of the sales for Beachbody, the private company that produces a host of video fitness franchises, including Turbo Jam, Slim in 6 and Insanity, the new harder brother to P90X.

According to the Informercial Monitoring Service, a company that monitors how many times infomercials run to gauge how successful they are, P90X has been in the top 25 most popular infomercials for nearly four years.

P90X is a success because it is the exact reverse of what has been offered in the past. You have 90 days, but instead of working out for only minutes a day, you have workout hard for 60 to 90 minutes. The success stories and the bodies of those who do it turn out to be so outrageous that it ranks as one of the best word-of-mouth products you’ll ever see.

“When people climb the DVD version of Mount Everest, it is so viral,” Beachbody CEO Carl Daikeler, a 23-year infomercial veteran.

It wasn’t an immediate success. The company tried 14 different versions of the infomercial before they really started to make money in 2006.

“One of our other secrets is that we don’t put the product at retail,” Daikeler said. “It wouldn’t sell well on the shelf because part of our appeal is that inspiration that comes along with people seeing how it works on television.”

At $119.95, it is an investment. Add on the resistance bands and a pull up bar and it’s even more expensive. But Daikeler argues it’s nothing compared to a gym membership or the BowFlex, which sold for more than $1,000.

P90X: Pumping Up Profits
CNBC's Darren Rovell takes a look at a company making hundreds of millions of dollars by promising to get you buff the hard way.

Plus, he says that investing the money in the program is part of getting into shape.

“If you don’t have skin in the game, you’re not going to finish this,” Daikeler said. “People who go get lap band surgery don’t have skin in the game. They get their surgery and then they get reimbursed by the insurance company.”

The workout is clearly not for everyone and requires a fit test before a consumer starts to make sure they’re up for what they’re about to go through. The product is fully refundable, minus the shipping, but Daikeler notes that P90X’s return rate is only 3.8 percent, which is very low for the industry.

Beachbody’s selling network is very impressive. It ranges from the people who call the 1-800 number by seeing it on TV or go to Amazon, where it is now one of that company’s top vendors. Once a consumer buys a product, he or she can get the assistance of a coach, who will interact with them virtually. That coach also gets credit for anything they sell to their P90X student, including Shakeology, a BeachBody created shake.

This multi-level marketing aspect of the business is growing, as many people who finish P90X, are now turning to it as a side business. Daikeler says the company has grown to 25,000 coaches/distributors in the last two years. Coaches get 25 percent of anything they sell.

Coaches include a former college baseball player named Josh Spencer. Spencer was financial analyst when he fell out of shape and ordered P90X in March 2008, phone in one hand and a bowl of ice cream in the other. After 90 days, he lost 25 pounds and 10 percent body fat and says he was in the best shape of his life.

Spencer started a Web site, I Want To Get Ripped, and began selling P90X and BeachBody products. With a pretty convincing YouTube video (see below) that has more than 800,000 views, Spencer is now the top selling “coach” in the country with 240 people under him. He says he’s not earning millions like some of the founding coaches, but the fact that he’s pulling in six figures a year led to him giving up his job as a financial analyst.

Daikeler is optimistic about BeachBody’s future. He says that Insanity, which came out in January, could one day surpass P90X in sales. The company keeps coming up with ideas so as not to get complacent and will support its business with $120 million in TV advertising this year.

For those who want something new every month, the company now offers One-on-One with Tony Horton, the face behind both franchises who is earning tons of money in royalties. It’s a once-a-month video with a new workout that costs $19.95.

Despite the rise of P90X and Beachbody, these guys have somehow managed to stay under the radar as far as the main press is concerned. But with the number of people buying what they have to sell, the story of their growing business is no longer a secret.

Questions? Comments? SportsBiz@cnbc.com

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