On September 30, 2024, The Beachbody Company, Inc. joined the ranks of other multi-level marketing companies to announce their decision to phase out their MLM business model in exchange for an affiliate model. Beachbody now accompanies Advocare, Rodan & Fields, Seint, Beauty Counter, and others.    

The reason I am specifically identifying Beachbody is because of a quote the Executive Chairman provided in the press release. He stated,

 “We recognize that in light of today’s current market dynamics, as well as consumer preferences, the multi-level marketing distribution model is outdated and unsustainable. The evolution to the affiliate model offers a simpler, more modern approach to customer acquisition and will directly reward the seller for their effort. The organizational challenges and complexity of the MLM approach has weighed on theCompany’s turnaround and the ability of Partners to optimize their potential.”

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When we look at a problem, we need to analyze it from first principles otherwise we quickly miss the forest for the trees.

At its heart, MLMis affiliate marketing. Direct selling and personal connection are the core MLM first principles. Everything else is a secondary factor. Social media is a means to direct selling and personal connection. I’m sure future technology will shift what we currently understand to be social media in unpredictable ways, so the means by which information is shared is not a first principle. The product is even a secondary factor, although less intuitively so. As Peter Thiel wrote in Zero to One, “Superior sales and distribution by itself can create a monopoly, even with no product differentiation. The inverse is not true.” Incredible salesmen can sell truly horrendous products, so the product itself does not dictate success alone.

The sudden distinction between MLM and affiliate is a non-solution to a non-problem. EveryMLM structure inherently has an affiliate model. In every MLM, individuals can make personal sales and earn a commission having never grown a team. Everyone is an affiliate until they make their first recruit.

I do not have issues from a legal or business standpoint with companies making a decision that they find in their best business judgment to be the right one. I do have an issue with companies throwing a grenade on their way out.

The ExecutiveChairman of Beachbody made a comment in the press release–“the multi-level marketing distribution model is outdated and unsustainable”–that he knows not to be true (perhaps he doesn’t know which is even worse) but concluded that it would be a nice jab that shareholders would appreciate it. It’s low hanging fruit to bash MLM.

Multi-level marketing was founded upon certain first principles. When a company buys into these principles, the model is far from outdated and unsustainable. When a company permits secondary factors to dictate, then an inevitable shift will occur.

There are many in the industry who are troubled by the recent changes. I do not blame them for being upset. Distributors have lost an income. Beachbody would be nowhere without the army of committed salespeople that are now without an income.  It’s not an easy spot to be in for either side, and this article is not meant to pick a side. We can save that debate for another day, but it’s most certainly a debate worth having.

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