The music industry is figuring out that a great Indoor Cycling class is built on a fabulous playlist. Now they're making noises that they feel they should be charging fitness studios a higher rate for their commercial performance licenses...
SoulCycle IPO Highlights Opportunities In Music Licensing
By Andrew Sparkler, Vice President, Business Affairs & Operations
At this year”™s SXSW, SoulCycle teamed up with Spotify and some of their favorite DJs at what was dubbed as “an epic music and movement experience.” While the popular fitness club”™s trip to Austin underscores the importance of music to its business, it is unclear if the music business is spinning to the same beat.
SoulCycle, launched in 2006, is now filing for an IPO. Its business is primarily based on offering a high intensity spin class led by an instructor who also serves as a DJ. Take a class, glance at their website or read their S-1 filing and it is clear that music is perhaps as essential to their business as the bikes themselves.
SoulCycle”™s SEC filing characterizes its product as a “carefully curated ‘cardio party”™ [that] is fueled by the personalities of our instructors, their uniquely crafted musical playlists and the energy of the room” and says that “[w]ith inspirational coaching and high-energy music, SoulCycle was created to strengthen both the mind and the body.” Their instructors go as far as to claim that music “is the most important part of what we do at SoulCycle.”
A companion article from Billboard.com echos this concern...
Performing rights organizations like ASCAP and BMI are on constant lookout for ways to generate royalties for their songwriters and rights holders, but one publishing exec (and former ASCAP vp) argues they need to look harder -- maybe even break a sweat -- when dealing with your favorite fitness center.
In an op-ed for Medium, Downtown Publishing vp of business affairs Andrew Sparkler said PROs are dropping the proverbial medicine ball by classifying certain gyms under "general" licenses -- the same umbrella as restaurants, bars and concert/sports venues -- when music has become such an ubiquitous and personalized part of the workout experience.
To make his point, Sparkler cites the popular SoulCycle chain of spin classes, who in a recent SEC filing for an IPO called their product a "carefully curated 'cardio party' [that] is fueled by the personalities of our instructors, their uniquely crafted musical playlists and the energy of the room."
In its SEC filing, SoulCycle projects 2015 revenue to be around $140 million and said it hopes to expand to 250 locations (up from 36 in 2014) in the near future.
Sparkler figures each SoulCycle is currently bringing in about $3.1 million apiece for the company, but is only paying a tiny fraction of that to PROs under the “general” licenses for the music it plays. BMI, for example, charges fitness clubs a maximum of $2,123 per year per location -- which would amount to .01 percent of what Sparkler estimates each SoulCycle makes. ASCAP also has a flat fee per location, but it slides depending on inflation.
According to his calculations, fitness center revenue increased over 104 percent in the U.S. between 2000 and 2014, and SoulCycle jumped 108 percent from 2012 to 2013 alone.
While noting that SoulCycle is doing nothing wrong -- they”™re simply paying the bills sent by PROs -- it”™s those rights groups that should tap into “this cultural phenomenon and increase their rates accordingly.”
So where does this lead? My guess is that ASCAP and BMI will be looking for ways to monetize (make more money) off the excitement surrounding SoulCycle/Indoor Cycling and the ease of music delivery from Spotify/iTunes Music = they'll be contacting clubs and studios with "revised" (read more expensive) license agreements.
As someone who prefers to maintain a level of fair exchange, I can't begrudge them for asking a higher rate than a sports bar or restaurant would pay. My only hope is that club/studio owners/managers recognise the value great music brings to our classes and not follow the LA Fitness path that pretends to save money by enforcing canned Muzac use by their Instructors 🙁
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