The MasterClass Phenomenon
One of the main reasons why I'm curious about MasterClass is because of the catch 22 problem that they have so effortlessly solved. I see the problem in this way: To get the top talent, you need access to consumers, but to get access to consumers, you need top talent.
I read about MasterClass and am particularly intrigued by how Dustin Hoffman first agreed to do a course on their platform after its initial seed funding round of $1.9 million or so. MasterClass started in 2015, and today, its valuation is close to $800 million, as it raised another $100 million in May 2020.
Another reason why I'm curious about MC is what they actually sell. Do they sell "access"? Do they sell some "secrets"? Or do they sell a window into how greatness works? In many ways, it's also an aspirational path to "success." This Atlantic article captures a lot about what MC really sells, and I still find MC pretty fascinating.
A few excerpts:
Notice what appeals to you each time you see a MC trailer:
What appealed to me was not whatever actionable thriller-writing tips I might glean, but rather the promise of his story, the story of how a writer becomes a mogul. Any hapless, hand-to-mouth mid-lister can provide instructions on outlining a novel. MasterClass dangled something else, a clear-cut path out of the precariat, the magic-bean shortcut to a fairy-tale ending—the secret to ever-elusive success.
See a few videos before you go ahead:
Other excerpts continue...
Click here for all excerpts
This is where things get a bit tricky:
But the story sits somewhat uncomfortably alongside the actual product, which is to a medical degree what an apple is to an orange planet.
This one is absolutely amazing:
What MasterClass purports to provide is a premium, high-level learning experience via a series of glossy videos taught by the world’s best.
This is super great:
As an educational platform, MasterClass is limited by its instructors’ inaccessibility. But as a repository for career advice and discussions about the creative process and how to navigate life as an artist (or athlete, chef, magician, entrepreneur), it’s a gold mine.
MasterClass seems ideally suited to frustrated 30-somethings for whom education has not necessarily resulted in upward mobility or even a job.
This says a lot:
Strictly speaking, a master class is a small class for very advanced students taught by a master in their field. But very advanced students in particular subject areas are vanishingly small cohorts—certainly not enough to attract hundreds of millions of dollars in investments. And so, MasterClass courses are not really designed for a specific skill level, but instead are aimed at the most general of general audiences.
This is kinda true honestly:
The classes are visually sumptuous, transporting, uplifting, and yet, frankly, a little boring, especially if you try to watch them all the way through. Doing so feels like being seated next to the dinner guest of your dreams—the Dalai Lama or Oscar Wilde or Barack Obama—and discovering that they won’t stop talking and that the dinner is 12 courses long.
This probably sums up the pandemic boom for MC:
For a certain cohort of people looking to pass the hours at home, namely those with leisure time and money, the new courses in cooking, mixology, and gardening arrived at the perfect homesteading moment.
These three paragraphs struck a deep chord with me:
Silicon Valley has talked about changing the world and people’s lives for a long time, and it’s safe to say that it has succeeded. The world has been remade by private equity and venture capital. Tech has “disrupted” almost every aspect of modern living.
Maybe it’s not a coincidence, then, that we find ourselves in a golden age of self-help and self-development, of “how I did it” podcasts and conferences and workshops. We’re encouraged to optimize ourselves at all times, and told to look upon this as fun, albeit compulsory. But although you can get a lot out of these activities, you can waste time looking for the answer, when what these stories all reveal is that great success is a combination of doing the work and getting (or perhaps starting out) really, really lucky.
Lately, I’ve been thinking about how prospectors in the California Gold Rush rarely struck it rich. In 1849, the ones who did well were those who supplied prospectors with shovels, tents, and jeans—they kept the dream alive. Samuel Brannan, who sold shovels and other goods, was considered California’s first millionaire. Levi Strauss, who co-invented blue jeans, died with a fortune of $6 million, worth $175 million today. There’s nothing wrong, of course, with supplying people with what they need to pursue their dreams, but it seems that during this time of growing wealth and social inequality, the jeans and shovels have become largely symbolic, and the prospecting they facilitate, the endless panning for something, anything, ever more intangible. There is no goal, really. The panning is the goal.
Who they Sell To?
But more important than what they sell seems to be the question — Who do they sell to?
This excerpt from the Atlantic article was pretty good:
In fact, the company refers to its target customers as CATS: “curious, aspiring 30-somethings.” CATS are old enough not to be planning to return to school, but young enough, in theory, that they need help advancing in their career. A CAT is a person whose life has become complicated, who has had to put aside some of the things they loved to do, who isn’t exactly doing the thing they dreamed of doing, David Schriber, MasterClass’s chief marketing officer, told me. They’re anxious about their future, their present, their position relative to that of their peers.
It's the casual learner who has graduated from college who will be interested in a service like this, and this is a pretty broad market itself. Instead of catering to the "masses" like Coursera and Udacity do (they have 1.4 million unique website viewers per month), MC caters to the "masses of the cream," if I can use that term.
This does not prevent them from earning less than the incumbents in Edtech though. Coursera and others earn revenue of somewhere between $70 - $100 million, whereas MasterClass, with its 300K subscribers, also earns somewhere a bit below (or in) that range... They're still private so they don't disclose actual numbers.
But I can see the growth potential, though. Chances are, if MC brings on Elon Musk or Tim Cook or Reed Hastings or any of the other geniuses, its subscriptions will skyrocket for a while. But I'm not sure if there's technically an upper limit or a glass ceiling for MC, just because of the fact that MC sells because it is exclusive. The moment they dilute their exclusivity just a tad bit, chances are it might start to wane off the halo around itself. Or maybe, by then, it will have reached such a scale that it can then allow the entry of not just A+++ players, but A players as well. But then, again, the question remains if there is another glass ceiling.
Confusing the Customer's Criterion of Choice
Have a look at this quote from the article:
One of the things Rogier is still often asked is whether he’s selling education or entertainment. The question annoys him. “Why can’t education also be entertaining?”
I wonder, though, is MC selling education, premium education, access to premium education, access to celebrities, entertainment disguised as education, or all in one? The answer, I think, is simple: I don't know. But maybe that is what works in MC's favor... That we don't really think hard about what we really want, that we don't really think hard about our problems but look for "solutions" to some latent, hidden need, that we don't know what we want but we always want what we don't have, are the things that I think MC sells.
Proof is in the pudding — this works, and it works pretty damn well.
Maybe this is what MC sells:
It reminds me of a kind of Spotify for careerist inspiration, a platform for dispensing assorted self-help and personal-development bonbons for the young capitalist striver. “And we’re not just offering classes or education,” Cooper said. “We’re also offering escape.”
Another thing that I find super interesting is that MC only offers annual subscription, no monthly subscription. Sure, it's $15 per month, but you're billed in one go, something that is a super interesting business model. Essentially, then, they're taking a larger share of the one-time advantage of having a genius like Musk on their platform, because you can't just subscribe for a month, watch Elon's videos, and leave... Instead, you'd have to buy the whole subscription.
All said and done, it's super interesting to see how you can build a premium subscription business model, and constantly grow.
Lots to think about this model...