Soho House of Cards (Part II) - Bundling Moments of Highly Public Exclusivity
Annabel's urinals, Winnie The Pooh and I'm-Better-Than-You As A Service -- how Soho House is all the calories and none of the nutrition.
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This is part II of a two part deep dive on the Rise of Soho House. See part I here.
In our last article we detailed the beginnings of Soho House in London, gave the background on the London private club scene it launched into in 1995 as a media & arts focused alternative to the traditional clubs focused on the aristocratic hierarchy, and elaborated on how Soho House was an arena for Highly Public Exclusivity that leaned into all the worst parts of faux intimacy and exclusivity symptomatic of social media.
But it is worth investigating the underlying dynamics of how we got here, specifically how the core fundamental economics of Soho House’s expansion strategy actually prevented it from being anything other than what it is. And to understand that we need to understand the Soho House Facilities Bundle.
Soho House wasn’t doomed to end up like this. Every private club and membership exists at least partially for broadcasting status — we are status monkeys after all, keenly aware of our place in the existing social hierarchy and always striving to improve it. And if you speak to old-timers there were moments in time where Soho House actually DID feel like a private club, and a refreshing one at that — on the surface Soho House made the private club model more accessible — $250 bucks a month instead of $1,000, women included, a priority on artistic types and creatives over aristocracy and wealth.
But they democratized the wrong part — they swapped out the old aristocracy for the new, and democratized access to the feeling that you are better than someone, while leaving the special feelings of intimacy that curation brings behind.
So what happened? What about Soho House’s model and how it evolved over the last 20 years led it away from some of those early warm & fuzzy feelings to something that seems more and more like a status monkey shake-down every day?
What caused the vanity & status peacocking present in every private club to move from the passenger seat to the driver’s seat?
Expansion: From Community to Facility
As Soho House migrated to America in 2003, there was a gradual change in strategy.
“Soho House never had community as its goal,” says an 2010-era employee at Soho House Meatpacking, but at least for a while, there was some semblance of real community in new locations according to Bob Morris:
“Soho House has become my ''Cheers.'' I am there too often at night, playing pinball in the game room, drinking Southsides (''WASP Mojitos,'' a bartender called them) and taking impressionable nonmember friends to dine.”
There was an inevitable side effect of expansion though - the loss of that community. “As they expanded rapidly fixed costs went up, and the easiest way to cover those fixed costs was to accept more members,” said another former long time Soho House employee.
While there will be varying opinions on what exactly makes a thriving community, most will agree that it includes some sense of intimacy, a level of curation, and a feeling of camaraderie and ownership, and it doesn’t take a genius to realize that the larger a community is, by definition the worse all those variables become. To community, size matters.
Soho House turned increasingly into less of a community and more of a somewhat crippled bundle of facilities.
What’s A Bundle?
Bundles aren’t anything new — every newspaper is a bundle of various columnists, cable bundles together sports with sitcoms and more. Bundles have gotten a bit of a bad rap these days as a lot of traditional media is being unbundled — the entire existence of Substack, the software platform this blog runs on, is predicated on unbundling reporters from stodgy publications and empowering them to go direct to the consumer, and Netflix, HBO and more have been attacking the cable bundle for decades now (and, it should be noted, reassembling their own bundles).
But not all bundles are bad, and in certain circumstances they make sense.
The guys from the Everything bundle, a newsletter bundle of 6 separate productivity & business focused newsletters, have a great explainer about when a bundle can work.
“A bundle essentially lets a group of newsletter-writers dynamically price-discriminate: most readers are subscribing because one or two components of the bundle are great and the rest are nice-to-have, so Everything’s $20/month sticker price is implicitly charging something like $15 for one newsletter in the bundle, $1 for another, $0 for another — but which newsletter is the premium product within the bundle varies from subscriber to subscriber.
In the Soho House example, they are banking on the fact that you might want to buy the pool, a restaurant, a bar, a (supposedly) curated community of influential cool people, a spa and a place to take meetings, in 27 locations around the world, all separately and they want to sell you that all in one convenient package, for a lower price. The one you REALLY care about is NYC but it adds value to throw access to the others in there as well.
If you view this through the facilities lens, it somewhat works. If you are literally judging the success of the bundle as “how many restaurants, coworking spaces, bars, pools and spas do I get access to worldwide” then well, every addition of a new bar or pool is a net positive. You may go to Chicago once every 5 years but if you have a meeting spot and a place to relax in the pool, that is a good thing.
Importantly though, the achilles heel of this strategy is revealed with another quote from Nathan & Dan’s article.
“Bundling works when customers have heterogeneous tastes and the cost of creating one more copy of the product is low.”
To translate that into plain english and extrapolate — bundling works when we have different tastes but letting someone enjoy everything, ALL the tastes, doesn’t actually cost the producer of the product very much at all, i.e. letting one more person on Netflix doesn’t cost them significantly.
Soho House’s business model glosses over the fact that it’s missing half that equation — while the subscribers do have different tastes (some prefer NYC, some Chicago), the cost of creating one more restaurant or bar or club location, or accommodating a person when they travel, is certainly not low — copying the product is NOT as simple as adding an additional email to the newsletter email list.
That cost either needs to be paid for in the form of higher membership fees, or in the form of higher membership numbers. Adding Soho House Barcelona means an additional 4,000 worldwide members in order to support the rent at that facility, not just allowing a new subscriber to click “play.”
If the premium product you are paying for is access to one of the facilities, this kind of works.
But where it starts making a real difference to the member is if you didn’t join for the facilities, but you joined for the community.
If Your Premium Product is Community, Bundles Suck
At some point to keep the “Cheers where everyone knows your name” feeling, well, the size needs to be small enough that people could conceivably know your name.
The problem is that one of the downsides of leaning into the facilities bundle is that the more facilities that are added, the more operating and fixed costs need to be covered, the more members need to be added, and the less curated a community is.
In bundle terms your premium product, community, actually REDUCES in value with every additional facility product added to the bundle.
This isn’t the case in other bundles. The quality of the Game of Thrones viewing experience does not deteriorate because an extra person signed up for HBO Max. My reading experience for a newsletter does not deteriorate because you signed up for it too.
Again, if what you are evaluating your Soho House membership on is “number of facilities I have access to” your experience also doesn’t degenerate when Soho House Austin launches.
But if you actually valued the community, it does.
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Unbundling Intimacy & Bundling Highly Public Exclusivity
So as Soho House scaled, it became less and less intimate, and it became more and more of a facilities bundle and less and less of a community.
It also became less and less exclusive, but as we spoke about in Part I, just like Soho House members didn’t need the type of privacy older member’s clubs like White’s members had required for so long, it turned out they didn’t need the type of exclusivity White’s had maintained for so long either.
I don’t believe Soho House necessarily made a conscious choice, but a side effect of being a private club tangential to media & entertainment was an audience that might be more open to the illusion of intimacy in place of actual intimacy.
And it turned out they are perfectly fine with the illusion of exclusivity as long as it was something they could broadcast to the world. It didn’t matter that you weren’t allowed to actually post on Instagram — taking a meeting at Soho House became a humble brag, inviting people over for drinks was a status sign and so a Soho House membership became more like a Prada bag than a private club.
The Real Soho House Bundle: Moments of Highly Public Exclusivity
But I’m going to go one step further — while every Soho House or additional facility degraded real exclusivity and intimacy, it actually increased the utility for a certain type of Soho House member — the highly public exclusivity power user.
This user wasn’t using exclusivity to create intimacy, but to broadcast an aspirational lifestyle and emphasize, like Bob in our various examples above, their value in relation to “impressionable nonmember friends.”
As Soho House expanded it completed it’s transition from private club to fashion brand — where intimacy was part of the initial equation, Soho House’s expansion forced a tipping point — what was the true value Soho House was providing, and what parts of the experience did they want to lean into?
We could even restate the value of the Soho House bundle as “we’ll give you 27 locations and 65+ opportunities like spas and movie theaters to appear better than someone else.”
If you view it that way, Soho House is kind of genius. And a bit diabolical.
Soho House unbundled intimacy from the traditional private club bundle and repurposed the private club model as a package of opportunities to broadcast highly public exclusivity.
It makes total sense why Soho House has been able to scale where others haven’t. It’s not a private club — it’s a snake oil salesman selling you exclusivity, without any of the intimacy that normally comes with it.
Soho House = Bundle (Opportunity To Broadcast Highly Public Exclusivity X # Facilities)
Auctioning Off the Urinals
While building Maxwell, we interviewed some designers who had worked on Soho House projects and found that this theory on faux intimacy was even supported in the design briefs for the locations.
The designers had instructions that the spaces needed to feel like ANYONE could see themselves in the space. It was the polar opposite of what we’re going for at Maxwell, where we are designing our spaces built around a very specific personality, as if it was a specific person or type of person’s home.
The Soho House aesthetic had to be universally aspirational. Not intimate and curated.
This is the opposite of the traditional private club aura. When Annabel’s, ironically also owned by Soho House’s partial owner Richard Caring, was remodeled, they put a lot of the original artwork on sale.
Ex-members literally asked to buy specific booths where they proposed to their wife.
Christy’s even auctioned off the urinals.
Annabel’s was a spot infused with the personality of its owners and built to appeal to a very specific type of person, to make that person feel at home and intimately comfortable. It was a 2nd home, not a 3rd place that catered to the lowest common denominator. It made bold choices, because when it’s your home it reflects the unique quirks that make up your personality.
The new Annabel’s didn’t cut any corners either and while I personally find certain rooms offensive to the eyes, I respect the bold choices.
5 Hertford St’s famous de Gournay wallpaper is another example - the design reflected the type of person the clubs were designed for and helped create that sense of intimacy, declaring an allegiance to a certain type of person through their design.
Soho House doesn’t take a stance — it’s aesthetic is pleasing and I’d frankly personally prefer to hang out at a Soho House than that Annabel’s room that is a bit gauche for my taste, but that is precisely the point — Annabel’s isn’t for me and I respect that they know who they ARE for.
All the Calories, None of the Nutrition — “I’m Better Than You” As-A-Service
Soho House seems to be somewhat aware of their place as a lifestyle luxury fashion brand and has started capitalizing on it.
Soho Home is a line of furniture and housewares. Cowshed Spa is a spa line. Soho Works is a co-working space and a co-living space is reportedly in the works as well.
More and more ways to broadcast your exclusivity — “I’m better than you,” as a service.
In a weird way Soho House took the worst of the private clubs, the exclusionary aspects, and universalized it, while leaving behind the actual community that some of these old school clubs, despite their prejudiced ways, still had.
Winnie The Pooh & Breaking Wind
It’s easy to criticize those old school clubs. White’s, the all-male private club in London that has been around since the end of the 1600s is royalist, classist, regressive and sexist.
It’s not beyond the pale to imagine they are likely insufferable elitist assholes, but on one very specific and important metric White’s is honest — they are providing a real sense of community and intimacy and curation to a specific group of people.
A White's member for 40 years went into depth about how he thought of White’s as a refuge:
"You can be completely unselfconscious. You are among people you have grown up with, people you went to school with. You speak the same instinctive language. It is not snobbish. It just allows you to relax. You can break wind and nobody minds."
Leave aside for a second that the curation that leads to that sense of intimacy is misogynistic and classist and it’s actually an admirable goal - to provide a place where people feel truly comfortable expressing themselves. To provide a place people feel truly at home.
This is epitomized by an unlikely man — A.A. Milne, the author of Winnie the Pooh.
A longtime member of The Garrick in London, on his deathbed he bequeathed 25% of his inheritance to his beloved club, a sum that was eventually sold for $40M+.
The Garrick meant so much to him, was such a core part of his identity, that he wanted to see it thrive long after he was gone.
Soho House realized there was a business in selling the exclusivity of these spots without any of the intimacy and identity that actually made them special.
On the surface Soho House has supposedly made the White’s model more accessible — lower cost, women included, a priority on some degree of merit over aristocracy.
But they democratized the wrong part of White’s — they swapped out the old aristocracy for the new, and democratized access to the feeling that you are better than someone, while leaving the special feeling, of well, being able to pass gas without judgement, behind, because those don’t scale.
Even the New York times posed this question back in 2003: “It is not clear if Mr. Jones is merely updating the old private club model, adding a bit of paint and shimmer, and an infusion of youth, or if he is just a cunning marketer using the trope of exclusivity to stir up the insecurities and open the wallets of status-conscious New Yorkers.”
Couldn’t have said it better myself.
Soho House’s realization was that a velvet rope sense of exclusivity didn’t need to literally be limited to royalty and CEOs, that a lower tier of exclusivity that didn’t include real intimacy was actually the perfect illusion that our disconnected world would buy, and that being a fashion brand was more lucrative than being a community.
All of the calories, none of the nutrition.
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David (@dlitwak), Kyle, Joelle
Curious, if in the future maxwell wants to expand, how you plan on doing it to not become the next soho house