Can Oprah Save Weight Watchers?

By
Oprah Winfrey
And you get a diet!Photo: Handout/2010 George Burns, Harpo Inc.

On Monday, Oprah Winfrey announced a new collaboration with Weight Watchers in which she will buy up 10 percent of the company, join its board, and (she promises) shed some pounds. Investors cheered; the company’s stock doubled and has continued to head higher today. But, as millions of Americans know all too well, starting a diet is easier than sticking to one. A plan that sounds great on paper and promises fantastic results rarely turns into a fitter, healthier body months or years down the line. Weight Watchers participants pay an average of $377 for a year of participation in the program, and lose an average of just five pounds in that time frame. Might investors similarly be cheering a financial deal that might never result in a fitter company?

Those weight-loss cost-benefit numbers might help explain why Americans have been leaving Weight Watchers for the numerous apps, sites, and fitness trackers that promise the same kind of wellness counseling for cheap or for free. Its profits have fallen, as has its stock price, from $85 a share in 2011 to around $6.80 or so right before the Oprah announcement.

At the same time, millions of Americans have for signed up for one of the numerous dirt-cheap or outright-free apps — like Lose It! and MyFitnessPal — that create diet plans, count calories, measure physical activity, and chart weight loss. Others have paid a one-time fee for a Fitbit or another tracker that comes with similar holistic digital support. In contrast, Weight Watchers’ online offering costs $20 a month or so, month after month, and its membership has flagged.

The company has tried to boost its digital offerings: A Weight Watchers executive promised this year that it would “become a 21st-century technology organization, engineered for the digital era, whose innovative technology fundamentally improves the way people manage their weight, health, and wellness.” It launched its own app years ago, and it has added functionality since. Users can now sync their Fitbit, Garmin, or Jawbone with their Weight Watchers account, for instance. It has also started offering personal coaching via phone and email. (That costs $55 a month.)  

Nevertheless, Weight Watchers remains an analog business in a digital era, with a giant cost structure in comparison to its app-based rivals and a dwindling number of subscribers across the business. (The company spent $262 million on marketing and $242 million on “selling, general, and administrative” expenses last year alone.) “Tools alone, technology alone, food programming alone will never reach the levels of success that are possible when they are brought together and combined with expert human engagement to guide and provide accountability,” chief executive officer Jim Chambers said during an earnings call last year. But many of the apps that compete with Weight Watchers do have a social component, letting spouses compete and encouraging friends to share their progress, or lack thereof. And one way or another, they are far cheaper.

Enter Oprah. If any celebrity endorsement and investment could turn the company’s fortunes around, it would be hers. For years now, book publishers, authors, small-scale clothing businesses, the makers of baked goods, and just about every other business have clamored for a sprinkle of her fairy dust. In general, celebrity endorsements tend to boost public companies’ stock returns and sales, and the bigger the endorser, the bigger the bump. With Oprah, the bump is colossal. The delightfully named study “You Get a Book! Demand Spillovers, Combative Advertising, and Celebrity Endorsements” found that a week after she chose a book for her book club, sales spiked 6,000 percent. The Oprah Effect can last, too. Once, she mentioned a smoked-turkey company quickly during one of her annual Oprah’s Favorite Things show. Eight years later, its sales were still markedly higher than before the mention.   

Might the Oprah Effect be at work when it comes to Weight Watchers? It does seem like a natural fit, given Oprah’s well-publicized struggles with her weight and her years-long interest in wellness and healthy living. Moreover, she has skin in the game this time around, giving her an incentive to promote Weight Watchers in her magazine and on her cable-television network. As such, I would expect to see a surge of new users signing up for the product in the coming months. Still, that does not change the structural challenges the company is facing, competing against dozens of lean, low-cost, iPhone-ready rivals. Weight Watchers is already on its own transformation, reorienting its business, branching out into new services, and getting leaner. (It has promised to cut $100 million in costs.) But as Oprah knows herself, sticking to those commitments and turning yourself around is tough.