Three Big Questions Facing CrossFit Inc.
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Three Big Questions Facing CrossFit Inc.
The world has effectively pressed pause on many industries and businesses, and the CrossFit community has been circling the wagons in an attempt to mitigate the toll within its ranks. Affiliates, and individual communities are not the only ones bobbing and weaving against the ropes. All water leads to the ocean, so any sustained hardships by the community will eventually make its way to the top.
This puts CrossFit Inc. at a crossroads as well, and taking a look at the bigger picture, there are three crucial questions that need to be answered going forward.
1. What does the financial future of CrossFit Inc. look like?
The elephant in the room with regards to the CrossFit Inc.’s future is what financial health for the company looks like long-term. In the short-term, CrossFit recently laid-off more employees, and the COVID-19 pandemic has seriously impeded various revenue streams for the company; with the full ripple effects unknown at this point.
- Seminars are a significant source of revenue, but they’re halted for the time being and probably won’t be up and running at full speed anytime soon. CrossFit still provides a host of online courses, and Dave Castro mentioned on Talking Elite Fitness that they’re adapting the L1 and L2 courses to the online formats. Even with a quick adjustment though, there are 53 scheduled courses during the month of April alone that CrossFit could be missing out on as a result of global shelter in-place, and isolation restrictions. We’re talking a potential seven figure loss for the month in seminars alone.
- Affiliate fees are by far the largest source of revenue for the company. 15,000+ affiliates worldwide at its peak amounts to around $45 million annually. CrossFit Inc. is doing the noble thing by helping its affiliates during this time in announcing that they will be alleviating some of the burden of affiliate fees for gyms, but there is a potential larger issue looming. Affiliate numbers broke the 15k barrier in 2018 and have remained relatively flat since, but in recent months the number finally dipped back below that mark, and the current financial implications of a pandemic could mean more affiliates go by the wayside. Some long-standing affiliates are closing for good, which is another dent in the armor.
- The CrossFit Games season is in flux, which introduces a pandora’s box of situations depending on if or when the remaining events actually take place. Saving those issues for later, the biggest evergreen factors financially for the Games are the declining participatory numbers, and the Reebok contract. Considering the 2018 Open had roughly 416,000 registered athletes, the past two Opens account for a combined loss of nearly 239,000 athletes comparatively, and $4.78 million dollars of lost registration fees that could be used for a rainy day. The ten-year title sponsorship contract with Reebok worth millions in royalties and prize purse money annually is set to expire as well, which leads to the next question.
2. What will happen to the CrossFit Games?
The 2020 CrossFit Games are at crossroads with a decision looming on whether to proceed in less than four months amid the COVID-19 pandemic. If the Games ultimately have to be cancelled in the coming months, what will the ripple effect be for the community? Will currently postponed Sanctionals still take place? If they have to cancel, how many will be able to stay afloat and will be able to effectively parlay into 2021? Cancelling 2020 means the 2019 Games, for better or worse, will be the lasting taste that CrossFit Inc. leaves in the communities mouth until next season, and what will be the ramifications of that?
- Is the Reebok contract a 10 year agreement, or a 10 Games agreement? If it’s the former, the contract could expire no matter what happens come August, but the latter could keep the agreement in place for another season. Either way, the current Reebok contract is on the way out eventually, and so is the money it brings. CrossFit Inc. will need to find a way to replace that revenue through new deals with potentially reduced incentives because Greg Glassman has stated that the company is “done with exclusive contracts.”
- If the Games are postponed to a later date in the year, then it buys some leeway for the postponed Sanctionals to still take place within a reasonable timeframe, but would potentially butt up against the Open for next year or require more date shifts. Even then, the logistics of a date change could be costly as well, and would also require some leg work on the city of Madison’s side.
Beyond this season, both the questions about the Reebok contract and the downward trend of Open participation stand as major issues for the company to tackle assuming the size, scale, and success of the Games is to remain constant or in any way improve.
3. What is CrossFit Health’s role in all of this?
Amidst the current health crisis, the message that CrossFit Health stands behind should be the central focus for a massive world health overhaul that’s an extension of what affiliates and CrossFitters have been doing for years. Unfortunately, that’s not the case. Despite the truth of what CrossFit has been able to accomplish, and the purity of CrossFit Health’s message and intent, it still feels like the movement has yet to take off the training wheels.
- It’s not for a lack of messaging. Just look at the crossfit.com overhaul, and media output since the massive company changes. The same quality “.com” workouts, free instructional training content, cooking/nutrition videos, movement variations for the new target audience, and a health tab that includes anything fitting the cause. By any stretch of the imagination, Greg Glassman has the website, message, and content he wants, but the results haven’t been nearly as monumental as one might expect. The activity on all branches of the website is mostly minimal, and the posts that do yield interaction do so through a handful of select regulars engaging one another. It appears as though CrossFit Inc. has lost some of the attention of its audience.
- The CrossFit YouTube channel has 1.53 million subscribers, and has largely focused on the new direction of the company as well. Taking as a sample March 2020, CrossFit’s videos have an average view ratio of 0.8% against their subscriber base, compared to a view ratio of 5.3% three years ago. It should be noted that the 5.3% should be even higher given that there were undoubtedly fewer than 1.52 million subscribers three years ago and still excludes Games content, but an 85% reduction in viewership on the second most popular social media platform on the planet is troubling. The nerfing of their other social media accounts, dismantling of their media team, and the communication of all the changes in the interim didn’t help either.
- The MDL1 program in theory is fantastic, taking the purveyors of health on the front lines and bringing them into the fold could affect real change on a multitude of levels. There are some brilliant minds, and world-class physicians involved as a result, but the current rate of indoctrination isn’t enough to overhaul a broken system, and it leaves one wondering how it could have benefitted from the talent that left the building 18 months ago. Media is often the megaphone by which small groups disseminate their message and become large groups, but it’s all moot if no one’s listening. To steal a tagline from the greatest sci-fi movie of all time, “in space, no one can hear you scream.”
Conceptually, everything is there, but success is more than the sum of our intentions. So what is the mechanism of action that’s going to yield the results that the “elegant solution to the world’s most vexing problem” demands?