What The Hell Is Going On With ClassPass?

Update: ClassPass founder and CEO Payal Kadakia announced today that the service will no longer offer unlimited monthly plans. This article was originally published on April 28, 2016.

Ever since ClassPass amassed an incredible $40 million in Series B funding in 2015, customers and studio owners alike have had the same question: “How could ClassPass possibly be a sustainable business?” The start-up, which began in New York but has now gone national, offers access to a slew of boutique fitness studios for one monthly rate. At first, it seemed almost too good to be true: $99 a month for unlimited fitness classes, in a city like New York, which teems with top studios offering every kind of workout you could dream of and then some? You could sweat it out to Bey in dance class one day, go for a ride at an indoor cycling studio the next, and finish your week om-ing after a vinyasa flow. Each of these classes could feasibly cost around $30 à la carte. How could those numbers align — could both studio owners and ClassPass really make money at that steep a discount? Perhaps it wasn’t a surprise when, last summer, the company announced a rate hike in New York City, to the tune of $125. Customers, of course, were not happy. Take Reagan Clark, a 29-year-old New Yorker who works in entertainment. A one-time ClassPass devotee, Clark was miffed at the price hike — and took her complaints to ClassPass itself.

Clark shared the email exchange with us. You can read it in full below. Dear Classpass team, I’ve been a loyal Classpass member for more than a year and have encouraged a lot of friends and coworkers to sign up and spread the word about Classpass.

However, I was very disappointed to receive the email that you are raising prices in two months for all current members without an option for users to remain at the $99/month price point. Many of us would be glad to upgrade to $125/month for better services (like more classes per studio per month, or better access to the tougher-to-get-into classes), but some of us would sacrifice service to stay below the $100/month mark. As a longtime and loyal user, it’s disappointing to not have the choice. With the price hike, I will have to reevaluate whether I stay with Classpass. With luxury gym membership (with unlimited classes) only being a little more expensive — it’s less of a no-brainer now. I may stay with Classpass, but I can't say I’ll continue to recommend it to my other exercise-loving friends and colleagues.

The company's response: Thanks for getting in touch! I understand if this is not the best news you received, but hopefully this will brighten things up for you: You still have access to ClassPass for two more monthly cycles at your current rate. We know you're going to love the improvements we have coming your way, so we hope you stick it out with us and continue to enjoy the absolute best fitness experience in your area! Best, Allison Clark didn’t see that as much of a bright spot. But ClassPass persevered, maintaining its place in the boutique world, where it purportedly sought to be a companion to the studios, helping to fill the unbooked bikes or mats in a class. Studio owners, in turn, looked to ClassPass as a marketing tool. One studio owner told me, under the condition of anonymity, that ClassPass gave niche studios a way to reach a greater audience. However, yesterday morning, all hell seemed to break loose in the parts of the internet populated by young, urban females with a moderate-but-not-excessive amount of cash to burn. ClassPass sent out an email to its customers announcing a pretty massive price hike for NYC customers: $190 for unlimited classes each month and $200 for any new customers. Doesn’t sound nearly as affordable as 99 bucks, right? That said, not everyone has to pay two hundo: ClassPass is offering a Core plan — 10 classes for $125, as well as a Base plan, which is five classes per month for $75. "We have to evolve our business model and adjust prices in order to create long-term sustainability with both our members and the market,” CEO Payal Kadakia said in a statement. “We've also realized that a one-size-fits-all membership is not diverse enough to serve all of our members’ unique needs, which is why we have decided to roll out new plans." (The company kindly offered Refinery29 readers a 50% discount for their first month on the Base plan, which you can learn more about here.) With this being the second rate hike in two years, the initial monthly fee has now almost doubled for many existing members. Once was annoying but understandable, as Clark noted, but this time, well, seemingly everyone on ClassPass freaked the fuck out. When I asked friends on Facebook for their experiences, my inbox got flooded (like Rachel Roy’s Instagram page did this weekend — and no, I am also not "Becky with the good hair"). “I AM SO MAD,” one friend wrote almost immediately upon my posting, followed by an email with the subject line, “CLASSPASS WTF??” Because for pretty much any young city dweller (anecdotally, you could say ClassPass attracts largely the twenty- and thirtysomething crowds), money is hard to come by, and the rent is just too damn high. Take Morgan, 23, who is fresh out of college and new to New York. “I've only just recently been getting my groove in terms of finding studios I love and making it a part of my routine,” Morgan says via email. “I just started a new job in December, so the price point for ClassPass was perfect for me as a recent graduate. I also really loved the social aspect of it all because I would sign up with my friends and try new classes and studios.” So when Morgan got yesterday’s email about the new pricing plan, she was less than pleased. “I’m going to stay with it through May [when the rate increases for existing members], see what my friends are doing, and then weigh my options (read: bank account).” She also noted that because she’s a regular exerciser, the 10 classes per month wouldn’t cut it. And she’s right: 10 hours of exercise per month is in no way enough of what your body needs to stay healthy. (Current guidelines recommend 30 minutes a day, five times a week.) On Twitter yesterday, legions of once-loyal users were calling out ClassPass for its new pricing system, declaring unofficial war and a trending hashtag for the duration of the day. As you can imagine, users were not pleased, especially in the ‘sphere.

You get the idea. Nicole Cherie Mieloch, a food editor in Brooklyn, not only cancelled her membership Wednesday, but also switched over to competitor site FitReserve. “My two favorite studios, Barry’s and Mile High Run Club, are on FitReserve — and they were never on ClassPass,” she says. “FitReserve also gives you access to a club’s entire schedule, something ClassPass never did,” Mieloch adds. She also notes that FitReserve allows you to book up to four times a month at any given studio, whereas ClassPass limits you to three. (A ClassPass spokesperson says that both Barry's Bootcamp and Mile High Run Club do offer classes on the platform.) So while many users seem pissed — the day-long trend is certainly an indication of that, anyway — are the studios benefitting from this remodel-slash-price hike? One studio owner who spoke with me under the condition of anonymity said that the studios are not profiting at all from the higher rates, and the financial deals between studios and ClassPass — which are contractually obligated not to be divulged — weren’t changing. “It got to a point [where] I realized I’d be shut down if I stayed on [ClassPass], because financially the numbers weren’t matching. I wasn’t taking in enough to cover the expenses,” the owner tells Refinery29. “I know their goal was to be for the remnant inventory, but the trend we saw was [that ClassPass was] people’s new way of paying for fitness in New York. We were losing our auto-pay monthly customers to ClassPass,” she adds. “So while we went off of it and lost revenue, it was important to build our sense of community back.” That sense of community is a legitimate point that even the angriest of ClassPass users may want to consider; you can’t beat the intimacy of a small, attention-driven class at a studio you go to regularly, where everybody (or, at least the instructor) knows your name. However, talk to someone like Louis Corragio, the owner of TrampoLEAN, and you’ll get a whole different take on the biz. Corragio relies on getting business through ClassPass — even with the prior rate hike, he told Refinery29 that the majority of his business does come from the booking engine. “I started teaching my trampoline class first at Chelsea Piers for about two years, and it was doing really well, so by the end of the second year, I decided to branch out on my own and find my own location for the class. I was filling spots, but attendance wasn’t what I expected. So when I found out about ClassPass, within about three weeks, my numbers were capped,” Corragio says. “The class just got very popular because of the platform.” He’s not concerned about the pricing change, and in fact, he spoke with the ClassPass team (as did several other off-the-record studio owners) before the news became public. Both Coraggio and ClassPass were careful to tell me that a whopping 30% of New York City boutique reservations are made through ClassPass alone; that's not a number to scoff at. A ClassPass spokesperson also notes that the company has a 96% retention rate with their studio partners.

Then there are the boutiques who also relied on ClassPass — but that initial reliance turned into a death sentence. “We started with ClassPass on Day One,” one owner told Refinery29 under the condition of anonymity. “People just want to pay the cheapest amount, though. They’d say to me, ‘Oh we love you, but we’re through ClassPass, and why would we pay $30 per class?’” he notes. “They act as if they’re a disruptive company. They’re not doing something unique; they just fucked it up,” he adds. His studio is no longer in business. “They cost small business, they cost jobs, they cheapened the product, and ultimately, their model was not sustainable,” he says. And that takes us back to the big question: Can ClassPlass really last? On the one hand, consumers tend to panic when something goes from free to not-free, or from cheap to less-cheap, but depending on the business, they sometimes have a way of getting used to it. (Think about The New York Times’ online paywall, which caused some agitation among digital readers accustomed to getting content for free, yet a year later, the paper hadn’t experienced a noticeable drop in web traffic.) After all, even at $190 per month, if you attend three classes per week, the cost of each class is just over $15 — still far lower than normal boutique-fitness rates. On the other hand, from what I could uncover, none of the revised pricing plans involve an increased incentive for studio owners, some of whom report that CP is actively taking memberships away from them — doing the opposite of converting CP users into studio regulars. So will studios continue to lose interest? And will the threats from the young, urban Twittersphere turn out to be legitimate? Only time will tell.