MasterClass Business Model In A Nutshell

Started as an attempt to transform education, MasterClass finds top talents and turn them into instructors. With a straightforward membership model of $180 per year, the streaming online education platform gives access to all its courses and the new releases on the platform. In 2020, it got valued at over $800 million.

Aspect	Description
Subscription Revenue	MasterClass primarily generates revenue through subscription fees. Users pay a monthly or annual subscription fee to gain access to the entire library of MasterClass content. Subscribers can explore courses taught by a diverse range of experts, including celebrities, industry leaders, and professionals. Subscription revenue serves as a recurring source of income for MasterClass and is a key component of its business model.
Celebrity Partnerships	MasterClass collaborates with well-known celebrities and experts in various fields, such as film, music, sports, cooking, and writing, to create and deliver courses. These high-profile partnerships not only attract users to the platform but also contribute to the company’s revenue. Celebrities are often compensated for their involvement in creating and promoting their MasterClass courses.
Merchandise Sales	MasterClass offers merchandise related to its courses and instructors, including items like books, cookware, and branded products. Users have the option to purchase these items, generating additional revenue for the company. Merchandise sales provide an avenue for users to further engage with the content and instructors they admire.
Gift Subscriptions	MasterClass offers gift subscriptions, allowing users to purchase subscriptions for others. This feature can be particularly popular during gift-giving occasions. Users pay for gift subscriptions, which can vary in duration, and recipients gain access to the MasterClass platform. Gift subscriptions serve as a way to expand the user base and generate additional revenue.
Challenges and Competition	MasterClass operates in a competitive online learning market, competing with other e-learning platforms and educational providers. Maintaining a high level of production quality, securing celebrity partnerships, and addressing diverse user interests are ongoing challenges. Staying relevant and adapting to changing learning preferences is also essential.
Future Growth Strategies	MasterClass’s future growth strategies may involve: – Expanding Content Library: Continuously adding new courses and instructors to attract a broader audience. – International Expansion: Expanding its presence in global markets. – Customization and Interactivity: Enhancing the user experience with interactive elements and personalization. – Education Partnerships: Collaborating with educational institutions for specialized content. – Original Content: Creating original series and content exclusive to the platform.

Table of Contents

Origin story

In an interview for 7×7 Aaron Rasmussen and David Rogier, highlighted their feelings about the education world:

I had been speaking with people in education, both in and outside the traditional school system, and found that people felt they were getting ripped off.

From there they started to redefine the concept of educaiton. During the web era, several companies have approached the change in education is several ways. MasterClass philosophy was that of enabling top talents to bcome instructors.

As they pointed out in the same interiew:

What does the most ideal online education look like? Learning from well-known instructors who have mastered a particular skill on one seamless platform. We’ve been working on MasterClass ever since!

So how did they convince the first celebrities to produce a class on their platform, when none knew them? David Rogier explained: “Honestly, lots of cold calling, persistence, great advisors and a little bit of luck.”

They also used some of the connections they had but as the founders reported the key ingredient was timing and the willingness of the top-class expert to wanting. todo it.

For instance, David Rogier reported how Kevin Space said he felt like it was his responsibility to “send the elevator down” for the next generation of actors.”

Of course, it helped the fact that, after initial traction, MsterClass also got well funded. Which definitely helped convince top experts to join the platform. As Hollywood Reported explained, “instructors make about $100,000 upfront when they begin working with MasterClass and receive 30 percent of the revenue their classes generate.“

This was back in 2017 when the platform was still at the beginnings. We can imagine that depending on the instructor and celebrity MasterClass has several levels of deals, to make it attractive for them to contribute a course on the platform.

Idea validation

David Rogier highlighted on Quora that when they were launching, to reduce the risk of failure, or perhaps to avoid spending years of their life and massive financial resources, they went through a process of idea validation, which consisted in asnwering four questions.

Those for questions can be used really, as a sort of business model framework to launch the business:

Hypothesis/Question: Could we get the best in the world to teach? Test/Expected Result to Validate The Hypothesis: get one to say yes (Dustin Hoffman)
Hypothesis/Question: Could we make great classes? Test/Expected Result to Validate The Hypothesis: make a test one (they filmed their parents teaching quilting and divorce tips — David Rogier’s dad was a family law attorney)
Hypothesis/Question: Would people want to take the classes? Test/Expected Result to Validate The Hypothesis: surveys, user interviews, and market comps.
Hypothesis/Question: Would all the math work (e.g. would CAC be at least less than Net Revenue)? Test/Expected Result to Validate The Hypothesis: try to sell an online class on how to CACs look. We tested everything we could (and still do)!

MasterClass’s mission and strategy

MasterClass’s mission is “to ignite the greatness in others” and it does that by “enabling anyone in the world to learn from the very best.”

MasterClass philosophy and strategy is skewed toward finding the top talents in several areas and transform them in instructors for the masses, where the educational experience is kept as much as possible as “one-to-one” meaning MasterClass tries to make it interactive via developing also online tools that help students learn better.

For instance, at once Rogier recounted how when developing the course with Christina Aguilera they had the chance to develop a proprietary technology to evaluate and measure the pitch of the voice, thus practice during the course.

How does MasterClass make money?

MasterClass is a streaming platform, that has a simple membership revenue model. The annual membership is $180 per year and provides unlimited access to all classes and new classes as they launch with a 30-day free trial.

As TechCrunch reported back in 2018, sales had more than doubled from 2016 to 2017, reaching probably the 50-100 million range, and probably this growth apace has kept growing also in 2019.

Given the new funding round in 2020, the company might be worth more than $800 million.

Key takeaways

Started as an attempt to enable a different format of education, where top experts are turned as instructors to teach a large number of people, MasterClass is a streaming platform, with a simple subscription model.
The site grew as the founders managed to get in the first celebrities to offer their courses on the platform, from there it also got funding allocated for growth.

Key Highlights

Company Overview: MasterClass is an online education platform that offers streaming courses taught by top experts in various fields. It was founded in 2013 by Aaron Rasmussen and David Rogier.
Education Transformation: MasterClass aimed to transform education by enabling renowned experts to become instructors and teach their skills to a wide audience.
Membership Model: MasterClass operates on a straightforward membership model. Users pay an annual fee of $180, which provides unlimited access to all courses and new releases on the platform. A 30-day free trial is also offered.
Origin Story: The founders identified issues in traditional education and wanted to create an ideal online learning platform. They persuaded top experts to become instructors through cold calling, persistence, and luck.
Instructor Attraction: MasterClass attracted instructors by offering upfront payments (around $100,000), revenue share (30%), and the opportunity to “send the elevator down” by sharing their expertise.
Idea Validation: Before launching, the founders validated their idea by answering four key questions: getting a top expert to agree to teach (Dustin Hoffman), creating a test class, gauging interest through surveys and user interviews, and assessing financial viability.
Mission and Strategy: MasterClass’s mission is to “ignite the greatness in others” by enabling people worldwide to learn from the best. The platform emphasizes interactive learning and tools to enhance the educational experience.
Revenue Generation: MasterClass generates revenue through its membership model. Users pay $180 annually for unlimited access to all courses and new releases. The platform’s sales doubled from 2016 to 2017 and likely continued to grow in subsequent years.
Valuation and Funding: MasterClass’s valuation reached over $800 million in 2020 after a successful funding round. The company’s growth is attributed to its unique approach to online education and its ability to attract top instructors.
Sustainable Growth: MasterClass’s success can be attributed to its focus on high-quality instruction, its interactive approach to online learning, and its ability to consistently attract new users with its diverse range of courses.