ClassPass reduces staff by more than half as social distancing drives fitness home

Key Points
  • ClassPass is laying off or furloughing just over half its employees, the company confirmed to CNBC.
  • Social distancing measures to combat the coronavirus has dried up much of its business connecting consumers with fitness studios, many of which are now shuttered.
  • Senior leadership relayed the news to staff Thursday in separate Zoom calls with those whose jobs were safe and those who were being permanently or temporarily cut.
ClassPass is launching a free app with audio workouts.
Source: ClassPass

ClassPass told employees Thursday it was laying off or furloughing just over half of its staff as social distancing measures slashed its revenue, the company confirmed to CNBC.

The changes impact 53% of the staff, with 22% laid off and 31% furloughed.

The staffing changes will affect hundreds of employees. The company previously had about 700 workers, according to LinkedIn data. ClassPass has offices in New York City, San Francisco, London, Sydney and Missoula, Mont., according to its website.

Senior leadership at ClassPass relayed information of the cuts in separate Zoom calls with employees: those whose jobs were safe, and those whose jobs were permanently or temporarily cut, the spokesperson confirmed, saying in an email the company had "no choice other than Zoom to connect with our team." Senior leaders were notified one-on-one by their direct managers, the spokesperson said, and larger teams were informed by "functional leaders" in their groups followed by one-on-one calls.

Later, on a company-wide call with remaining staff, CEO Fritz Lanman got emotional speaking about the measures, the spokesperson said. All employees were offered mental health services, outplacement coaching and severance.

The privately held fitness platform, valued over $1 billion earlier this year, has seen 95% of its revenue dry up, the company confirmed in a statement. ClassPass' app serves as a marketplace for fitness studio owners and consumers, allowing them to search through workout and wellness offerings and book them through the platform, usually at a discount. With governments around the world ordering or instructing citizens to stay at home and avoid gathering, attendance at gyms dropped dramatically before many shuttered.

ClassPass had been facing backlash from some studio owners prior to the crisis. While the company says its platform helps surface new studio options to consumers, some studio owners told Vice that ClassPass financially squeezes its fitness partners through an algorithm that drives down prices for its classes. Studio owners who spoke to Vice complained they couldn't compete with ClassPass' low prices even if they got off the app. A ClassPass spokesperson told Vice it supports its partners and its "system is designed not to compete with partners' direct businesses."

As studios around the world were forced to close shop in to adhere to public health guidelines, ClassPass saw an opportunity to help out and perhaps gain back some goodwill. The company announced a program that would allow partner studios to offer live-streamed classes through the app, with 100% of proceeds going to the studios through June 1. It also set up a relief fund for partners and said it would match up to $1 million in donations. ClassPass has also offered its own library of pre-recorded fitness classes for free during the crisis.

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