18/06/2009 - 00:00

Gyms wait on copyright decision

18/06/2009 - 00:00

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IT requires plenty of upfront capital, has high ongoing costs and, if it fails, the owner is almost certain to be forced into exile in a bid to escape out-of-pocket members.

Gyms wait on copyright decision

IT requires plenty of upfront capital, has high ongoing costs and, if it fails, the owner is almost certain to be forced into exile in a bid to escape out-of-pocket members. So why would anyone want to own a gym?

Louise Ferguson, owner of Healthy Life Fitness Centres in Hillarys and Cottesloe, said there was great potential for the industry as it led the fight against obesity and catered for impending baby boomer retirements.

"But it is a hard business," Ms Ferguson told WA Business News. "You have to be on your toes all the time."

The possibility of government subsidies for regular gym-goers is another potential windfall for the sector, which is an argument that gathers supporters as fitness levels fall.

On the flip side, industry participants say a proposed hike in music copyright fees - which is currently before the Copyright Tribunal of Australia - would force a number of operators out of business.

The local fitness industry can be roughly separated into three main groups, all of which face different challenges. The first group, consisting of gym chains, is the most prominent.

With about 30,000 members in the state, Zest Health Clubs dominates the local industry, although major chains like Fitness First also have a strong foothold. The women's-only gyms Curves and Contours have carved out a niche, as has the high-end Next Generation.

Many chains, which demand 2,000 square metre-plus per gym, cost several millions of dollars to build and fit-out, not to mention the high ongoing rental and upkeep charges.

There are some exceptions, like 24-hour gym operator Jetts, which uses smaller premises and, through a franchise arrangement, offers potential owners entry into the market for an investment of about $200,000.

By comparison, gym operators would need between $400,000 and $800,000 to run an operation similar to Fernwood Women's Health Club.

With huge associated costs, big chains need a lot of members to survive.

Ms Ferguson said the economic downturn had temporarily halted the expansion of some operators in WA.

"All plans have been put on hold by lots of the chains," she said.

When big chains go well, turnover swells into the tens of millions of dollars. When they go bust, like the Healthland chain, the memberships of tens of thousands of gym-goers become worthless overnight, and the whole industry takes a hit.

The second group - public-owned fitness centres - includes all the local government and university run centres, like the 4,000-member strong ECU Sport & Fitness Centre at Edith Cowan University campuses.

Subiaco sports club Lords will open next month as a city-owned club, after the former Kerry Stokes-owned business blamed council increases for its closure late last year.

New Lords manager Craig Johnson said he looked forward to rebuilding the centre into a thriving recreation centre.

"It's such a unique opportunity to manage a facility during its start up and reopening phase," he said.

City of Subiaco chief executive Stephen Tindale said it was the city's intention to run Lords on an ongoing basis, with a review to take place in five years.

"Lords is a council-run community recreation centre; no different to the approach taken by many councils across Australia that successfully run recreation centres as part of their suite of community services and facilities," Mr Tindale said.

The remaining group, loosely classified as independents, aim to carve niches among WA's sprawling population that might not otherwise support a large chain, and their associated high running costs.

At the low end of the market, mine sites might buy $70,000 to $80,000 worth of equipment to fit out a gym for workers, while it would take about $1.5 million to fit-out a basic commercial gym.

There are some issues that unite the three groups, such as their opposition to a proposed hike in music copyright fees.

"Music costs would go from $5 million a year to $100 million," said Robert Barnes, general manager of operations for industry body Fitness Australia. "That would put most of the industry out of business."

The Phonographic Performance Company of Australia, which represents record artists and labels like Sony Music and EMI, is seeking a higher copyright fee.

Chief executive Stephen Peach has previously said the profitable fitness industry had long been paying a paltry amount for the music that was crucial for their business.

"Imagine people working out in a silent fitness class and you can start to appreciate the valuable contribution that sound recordings make to the fitness industry," Mr Peach said.

A decision is not expected to be reached for several months.

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