MasterClass – Mastering Scale as Edutainment Platform?

MasterClass is a platform that provides online video courses on topics from film directing to tennis taught by iconic figures (like Martin Scorsese and Serena Williams). As they raised $80M Series D funding in 2018, they must master scale sustainably.

MasterClass is a platform that provides online video courses on topics from film directing to tennis taught by iconic figures in each field (like Martin Scorsese and Serena Williams). Launched in 2015 and it has raised $136M to date from top VC firms like IVP, NEA, and Atomico while gaining brand recognition among millions of Americans. [1].

MasterClass is best suited for creative people looking for inspiration from the world’s most successful people. It offers classes for writers, photographers, musicians, journalists, athletes, and much more. In contrast, many other online education providers focus on providing you with practical skills, such as in the areas of business or data science.


Value Creation

  • Education + Entertainment. MasterClass’s value proposition is that “You can learn from the best while being entertained in the process”. It’s an experience that is similar to watching Netflix, except that instead of mindlessly consuming content you’re learning from the world’s top creators.
  • High quality instructor + WoM marketing. Every single teacher is quite simply world class. The company currently offers 80+ classes, including hours of instructional insights from Martin Scorsese, Ron Howard, James Patterson, Gordon Ramsay, Serena Williams, among many experts in their respective fields. This dynamic drives word of mouth marketing for MasterClass courses (“My screenwriting class is taught by Shonda Rhimes!”), accelerated by the large social media followings of the instructors and the free publicity their course generates in the news. 

  • Differentiation with EdTech competitors on content. From the start, MasterClass has taken a different path from other startups in the online courses segment of media (often called MOOCs, or massively open online courses) by specializing in capital-intensive, high-production-quality video series with the biggest names.
  • Data-driven approach + Network effects. Due to the user inputs of subscription streaming services, MasterClass can gain an advantage against the crowded field of quantity-over-quality competitors in monetization and defensibility. The more subscribers who sign up for must-see content by the celebrities they look up to, the more MasterClass can invest in the next slate of courses to ensure more hits, and the more data it collects on user engagement to improve their productions. This feedback loop empowers them to grow faster than competitors can keep up.


Value Capture

  • Monthly / annual subscription model. To increase backet size and encourage more content engagement, MasterClass rolled out a new subscription model that allows customers to pay an annual fee of $180 for access to all MasterClass lessons, which are otherwise $90 each class (which it used to be until mid 2018). It’s been a huge success so far, counting for 80% of the company’s revenue. The company looks ever less like a MOOC and more like a Netflix-style SVOD (subscription video on demand) platform for educational video series.
  • Mix of structure with celebrities. It’s a mix of either a fee or a back-end royalty. According to Hollywod Reporter [2], they have likely done so by accepting a $100,000 advance for each course they deliver, along with 30% of the revenue their classes generate.
  • Revenue on par, with higher engagement metrics. According to co-founder & CEO Rogier, MasterClass revenues were just shy of the leading MOOCs, Udacity and Coursera, which are understood to be in the $70-100M range [3]. The MasterClass video library will have a longer shelf-life than educational videos from unknown names. And in terms of completion rate, the average MOOC sees 4% finish a class, MasterClass’s rate is 5-8 times of that. 


Scalability & Sustainability as EdTech Platform

  • Capital intensive & user retention. Similar to starting a company in an industrial or highly regulated industry, starting a media startup focused on high-quality productions is capital intensive. Therefore, there are limited classes in the library given any subject and how MasterClass can retain users on the platform after acquiring them remains unknown. 
  • Deeper or wider? The key strategy question in the educational content space is often whether to expand deeper or broader. MasterClass offers quality in terms of talent and production value but has made big investments into adding introductory courses across a wider range of skills from a wider range of VIPs rather than creating more advanced course material for users to keep progressing in one skill area.
  • Is it education? Or entertainment? Education is the process of facilitating learning, or the acquisition of knowledge/skills. However, MasterClasses’s form of teaching is a collection of tips and reflections. Stuart Rogers, who runs an L.A. acting school that has been home to Allison Janney and Octavia Spencer, has a similar perspective: “It’s not a master class, or a class of any kind,” he says. “It’s tips and anecdotal information — a very cool thing professionals have done to share stories about their art. But it’s not training.” [4]
  • Lack of community. Once signed up for the class, members also gain access to the MasterClass Community called the “Hub”, where you can join discussions, share work, and connect with your fellow students. However, it doesn’t seem like there’s a huge amount of interaction happening. MasterClass is better designed for video consumption rather than collaborative learning.


What’s Next?

On the short term, some of the newest 2020 instructors include diverse women and amazing artists, as per Rogier, he wants to change “how mastery looks like”. In fact, they’re really well-rounded this year. With multiple business courses, a dance course, music course, and writing courses, there’s something for everyone this year.

On the long term, whether MasterClass can continue to scale sustainably as a Edutainment platform remains a question. Founder Rogier mentioned that his mission was to change people’s lives and he wanted to use “life changed” as a KPI metric to track. As noble as it sounds, is it a viable business model? Celebrity instructor resources and content refresh seem limited, which leads to a lower willingness to pay from the user end. In comparison, other VC-backed MOOCs (like Coursera, Udemy, Udacity, and others) started monetization with certification and corporates training (internal training and employees’ continuing education).








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13 thoughts on “MasterClass – Mastering Scale as Edutainment Platform?

  1. Cool post, Rocio!

    When I was reading your assessment of MasterClass, I was wondering who its true competitors are and whether theplatform could eventually become commoditized. MOOCs are an obvious type of competition, but other potential competitors include TEDx, YouTube, and subscription streaming services like Hulu and Netflix since they also compete for viewer’s attention and media spend.

    While I agree that most MOOCs are not as successful/value creating as MasterClass, I wonder if a platform with larger user-base scale like YouTube could crush MasterClass if it took a step in this direction. They could easily afford to pay a high-profile creator $100k plus 30% ad revenue sharing, and potentially offer celebrities a higher revenue given how big their user bases are. Is MasterClass considering making their contracts exclusive to prevent multihoming?

  2. Thanks for this – I thought your analysis was great! I’m always getting bombarded by instagram ads for MasterClass (although never converted myself), so interesting to learn more. I had similar thoughts to Megan – who are MasterClass’ true competitors? To me, it seems like anything that people might do to “better” or entertain themselves. You mentioned streaming services, but I imagine even things like yoga classes, the gym, books, or dinner with friends could be competitors/substitutes for this platform. While I do agree with you that they are a differentiated platform in their content and high production value, I wonder if a way to create more value is a way to better certify the students that complete courses. Maybe this isn’t possible in the arts, and maybe this would make the platform look a lot more like its direct competitors, but some kind of innovation might be necessary to sustain the platform by keeping users on it for longer. I also like Megan’s point above around having celebrities/talent sign agreements that limit them to MasterClass’ platform only – although unclear if they would be on board with this, and they would definitely have the leverage in this negotiation!

  3. I love the analysis! Like Leah, I too have seen a lot of ads but haven’t signed up for this yet!

    At first glance, this seems more akin to a “video podcast” series with celebrity experts rather than an educational tool and on those terms, I’m not so sure how the certification by Masterclass would work. I think the certifications on Coursera have value because they’re a variation of a class taught at a university and hence imply that you’ve done some form of work that is worthy of certification by a particular institute. What I think would incentivize users to stick to the platform is if Masterclass can provide a new product and partner with local artists/chefs etc. where subscribers who are interested can go and practice their art to really enhance the learning experience and double down on their “educational product” messaging rather than compete with Netflix etc. for screenshare. In my head, the current situation is analogous to an HBS class that is exclusively the case protagonists coming in and talking about their experience!

  4. Super interesting read – I have seen ads too but wasn’t aware what the platform consisted of! In addition to the concerns that you raised about the business model and competitors, I have concerns about user retention. Because of the big celebrity names, I think it will be easy to attract customers to the platform and they benefit from free marketing, but will this be more of a novelty than a repeatable activity? After watching one cooking class with Gordon Ramsey will I really come back each month for more instruction? One possibility to combat this is, instead of offering one time videos, they could begin offering courses that would keep the user engaged over a longer period of time.

  5. Super interesting read!

    I do question the sustainability of the model. Firstly, I don’t know how many ongoing master class users there are, as most classes as you point out are not going deeper into one topic, but rather broader across different topics. So from that perspective, are there really that many users that look at one cooking class, then jump to a class on basketball, then to a class on movies etc.? If these users do not necessarily exist at scale, the subscription value proposition is not as clear to me. An alternative beneficiary of the subscription model would be someone who repeatedly watches the same classes over and over. But again I wonder if that is realistic – unlike TV shows or even movies that can be re-watched many times, I doubt that online classes have a similar kind of appeal. So if there are limited repeat watchers out there, and also limited people that continuously watch a number of different videos on Masterclass, who really benefits from the subscription model’s value proposition?

    1. I am similarly bearish. Masterclass subscribers are by and large going to confine themselves to just a couple verticals, and they probably aren’t going to rewatch much of the content, so there is a heavy burden on Masterclass to continue to innovate with new content if they want to retain customers – and because of the distinct production style, they have to take on the entire creative and financial burden themselves.

      This is very different from Netflix, which typically doesn’t bear the end-to-end costs and risks of content creation, and can choose to buy / not buy content based upon what they believe is in-demand; critically, Netflix content also lends itself to being rewatched. Netflix has it much easier than Masterclass, and we see how hard things have been for Netflix during periods of its history.

      As a result, I don’t really see the subscription model working out for Masterclass. I think a year or two from now we will see their subscription numbers plummet as people opt not to review because they have maxxed out on the content that is interesting to them. The only way around that is huge, continued capital outlay by Masterclass to continue creating original content, and there will come a point when it is no longer possible to finance that kind of investment.

  6. Had fun reading this – I also took Gladwell’s class on storytelling and enjoyed going through it! Masterclass seems to be positioned as an upscale/luxury version of Coursera and other MOOCs, leveraging celebrities and high quality content.

    Two things I’m wondering:
    1) Are same side network effects from the supply/teacher side? Is there a way to leverage a Masterclass brand that makes it more of a thought leader platform like TED or even offline events such as SXSW?
    2) Would Masterclass be an acquisition candidate for a talent management agency?

  7. Fascinating stuff! The $90/class is astounding, and I’m surprised it was so successful at that price point. The annual sub is a lot more economical for consumers, and I’d imagine shoring up longterm, predictable revenue is an advantage for MasterClass as well (vs. a la carte).

    I was recently drawn to MasterClass as they have been advertising their Bob Iger session. It is interesting that Iger’s session is free – likely an advertisement play for multiple reasons. It was released around the same time as Iger’s management book last year, and could be utilized as advertisement for his book. Likewise, Iger’s free session could be viewed as a customer acquisition tool for MasterClass for other classes/sub offerings.

    This makes me wonder how talent can best leverage the MasterClass platform to enhance their brand, expand their following, and connect with audiences in a new and arguably more intimate (and perhaps erudite) medium.

  8. Great article! As most of the other comments, as I was reading your article my main thoughts were that this is more akin to entertainment than to an actual educational experience, and that more than competing against companies in the Ed Tech space, Masterclass competes against companies in the media space. Specially since they are expanding more horizontally by developing content in such a broad spectrum of spaces, I wonder about the retention ability given that customers may not share similar interests and may not choose to watch more than a few of their classes.

  9. Interesting article! I also have seen the ads and have considered trying it out from time to time. In the end, though, I think “subscription fatigue” has set in, and I can’t justify yet another monthly fee – especially one so steep. I can’t imagine a world in which young professionals give up their Netflix, Hulu, and HBO subscriptions and replace them with Masterclass. I agree with the comments above that it is definitely a premium product, but to sustain engagement over the long term, they will need to shift to additional channels. Perhaps they are better suited as a content developer that licenses their classes to the traditional distributors (e.g. Netflix, Hulu). I think this will help them capture the value of their content without the risk of positioning themselves as another subscription service that results in high customer attrition.

  10. Thanks for the interesting read, Rocio! I am very tempted to explore this platform but find myself wondering whether video is truly the best method of learning. If the platform lacks the same quality of interactivity and reinforcement learning that characterizes a more traditional EdTech platform, I imagine it would be difficult to retain much of the lessons being taught. As such, I tend to think this is a start-up that should aim for exit by acquisition, either by media aggregators like Netflix, or EdTech platforms like Coursera. Particularly with so many new video content aggregators cropping up (such as Disney+ and Quibi) and with such a crowded EdTech market, Masterclass may not have a defensible position if it plays in two spaces (education and video entertainment) passably, rather than excelling in one.

  11. Thanks for sharing, Rocio! I have seen lots of ads for Masterclass online, but I have wondered about its quality.

    For instance, if I take a Masterclass, how well do I really have that subject “mastered” by the end of it? For some reason, in the back of my mind, I think that if I take a course on Coursera, I am going to finish with a deep understanding of the topic, but if I take a Masterclass, I am just going to scratch the surface. Do you think that is valid? I would love any advice as I consider taking some of these.

    Thank you!

  12. Great analysis Rocio! MasterClass compared to other online learning education in the market seems to have a clear value proposition that is differentiated–attracting best in class athletes, artists, and entertainers to teach the course. I’m curious about the retention rate and the types of users its truly attracting. In a world where credentialing is still highly valued by companies, and as we know the online education still suffers from completion rates and positions itself as a career pathway, I wonder if this is a product that could really sustain in the long run? Will we pay to learn purely for enjoyment? It’s definitely an exciting company with a unique focus in the intersection of education and entertainment.

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