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Get really fit by hitting the basement

Pricey boutique studios may be some of the hottest new spaces in the fitness field, but competition is also heating up right in your own basement.

Thousands of offerings, from cardio to core, back to butt, are now in demand and on-demand, streaming through smart TVs, tablets and laptops across America and around the world. The companies behind these offerings are raking in new subscriptions and new cash at a heart-pumping pace, some of them holding on to older business models at the same time.

At Santa Monica–based Beachbody, the behemoth in fitness DVDs, on-demand is just over a year old. The company, founded in 1998, surpassed $1 billion in sales in 2014, according to its website. It launched the on-demand service in March of 2015, and with it hired hundreds of new employees, including Bill Bradford, a former executive at Fox and Hulu, as chief digital officer, to support the new platform.

Beachbody headquarters in Santa Monica, California
Stephanie Dhue | CNBC
Beachbody headquarters in Santa Monica, California

"Instead of cannibalizing the business, it's actually enhancing it," said Carl Daikeler, CEO of Beachbody. "DVDs have worked just fine for over 10 years, but now this opportunity to have a two-way dialogue, and the ability to support the customer and their results, provided a meaningful opportunity to expand what we give the customer."

With Beachbody's already popular brands like P90X, Insanity and 21 Day Fix, the transition to streaming on-demand workouts didn't take a huge investment.

"I don't think there is much of a transition for me. I just show up and hit my mark and do my thing," said Tony Horton, creator of the popular P90X workouts and the recently released "22 Minute Hard Corps." "Nobody has cassette players anymore, the half-inch VHS is gone and that's where the DVD is going. You don't have to call the operator and order some stuff over the phone and then wait for your postman to deliver it so you can take it out of the package and stick it in to play. No, man, you sign up today, you work out today."

Beachbody on-demand, which costs about $12.95 per month (billed quarterly at $38.87), now has more than 825,000 subscribers, according to the company. In addition to computers and tablets, it streams through Roku, Apple TV, Amazon Fire TV and Chromecast. Beachbody also launched an IOS app for streaming on smartphones in January. Nearly two-thirds of its customers say they want both the DVDs and the streaming option, according to Daikeler.

"If you take the Beachbody model, there is probably a good analogy to Netflix," noted Seth Shapiro, a digital media analyst and principal at New Amsterdam Media LLC. "Netflix began the same way that Beachbody has become a $200 million business in the consumption of fixed media, DVD sales, but increasingly over time you're going to see more and more content shift from fixed media to online content, and so it's likely that more and more of the stuff would be available on demand on any device at any time, and probably that's the direction that Beachbody will have to go."


The Daily Burn
Source: Daily Burn

That dual-platform strategy, however, is also behind Crunch's move into on-demand. The brick-and-mortar gym chain, founded in 1989, is headquartered in New York City and co-owned by New Evolution Ventures and private-equity firm Angelo, Gordon & Co., according to its website. It has over 400,000 members with over 150 corporate-owned and franchised locations (Crunch Essential) in cities throughout the U.S. and in Australia and Puerto Rico. It launched Crunch Live, an on-demand video service, in 2014, which is free to gym members and costs $9.99 per month for nonmembers. It is available on computers, tablets and streaming devices as well.

"Crunch is a powerful brand, and we felt like adding an online digital experience helped extend our brand outside the four walls of our gym," said Keith Worts, CEO of Crunch Fitness. "It has introduced Crunch to new members that may not be close to a Crunch location. Perhaps they are in suburbia in the middle of America somewhere where there is not a Crunch, and they have the ability to have an experience with some of our instructors in Crunch Live and get them familiar with the brand and get them understanding a little what Crunch is about."

Crunch Live is now being used in 30 countries around the world, according to Worts. Clearly the desire for on-demand is only growing, with companies like Daily Burn, Gaia, Peloton and scores of others charging monthly fees for the content. And then there are free workouts just about everywhere, including on YouTube and even on fitness clothing websites.

"Increasingly what you'll see is as more and more of the over- the-top services proliferate and become a default standard, all the barriers were broken down by Netflix and Hulu adoption rates," said Shapiro. "You'll see online services going after the niches that cable hasn't dominated, and anything that requires personalization leads. Fitness is perfect, but obviously it's really crowded."


A fitness class at Crunch gym in New York.
Stephanie Dhue | CNBC
A fitness class at Crunch gym in New York.

Gaiam, which recently sold off its equipment products line and rebranded itself "Gaia," offers on-demand yoga, Pilates and meditation on Comcast and Verizon, for an additional fee. It also offers streaming services, much like its competitors, with a similar price point. It plays on the same field, but executives claim its brand objective differentiates Gaia from the competition.

"Gaia is more focused on the lifestyle of it, particularly the yoga lifestyle, so we don't see Beachbody as a competitor," said Jaymi Bauer, Chief Marketing Officer of Gaia. "We're seeing the rise in the appetite to create the lifestyle. The 360-degree approach of whole-health wellness."

The field may be crowded, but that, said Beachbody's Daikeler, is where quality dominates over quantity. The same could have been said for videos dating back to Jane Fonda's famous leg-warmer workout in the 1980s. The price ranges and options were wide, but consumers were willing to pay for what worked.


"Instead of cannibalizing the business, it's actually enhancing it. DVDs have worked just fine for over 10 years, but now this opportunity to have a two-way dialogue, and the ability to support the customer and their results, provided a meaningful opportunity to expand what we give the customer." -Carl Daikeler, CEO of Beachbody

"You could go to Barnes & Noble to the discount rack and get a DVD for $9.95 that would promise body transformation," Daikeler added, "and here we were selling P90X for $120.

"The reason that it works, even in this online environment where you can go to YouTube and find workouts, but you've got to put the effort in, you have to have the knowledge to understand what structure will get you body transformation — that's what Beachbody does, and that's how we test our programs," said Daikeler. "Is there going to be competition? Will all the big guys consider that providing fitness programming to the end user is a value? Of course there will be. What we do that is actually effective is we test this stuff in a particular sequence so that people get results."

Disclosure: Comcast is the parent company of CNBC.