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Good morning! It's Friday, November 24th. Happy Black Friday! Today, we’re breaking down MasterClass, a platform selling educational content from celebrities and experts that generates $100M in ARR!

THE FEATURE

MasterClass– $100M in ARR from Marketing Celebrities as Educators

The online education market exploded following the pandemic, as seen in the digital learning platform Coursera, which tripled its user base to 118M subscribers between 2019 and 2022.

While the market for online education programs backed with certifications and accreditations has grown substantially, MasterClass has found its own niche in the market. 

MasterClass essentially sells educational content as entertainment with its star-studded cast of “educators,” ranging from top-tier athletes to retired politicians. Considering that Masterclass generates ~$100M in annual recurring revenue, its niche business seems to be working.

So, What’s the Business?

MasterClass founder David Rogier had no experience in the education space before creating his company. However, he had completed an MBA at Stanford and worked for a few years at Harrison Metal, a VC firm founded by one of his professors. 

That same professor gave Rogier a check for $500K when he left the firm in 2012 to start his own business. It was only in 2015 that he found the inspiration behind MasterClass after attending a conference led by computing pioneer Alan Kay. 

That conference showed Rogier the massive impact learning directly from a renowned expert can have on people, and he set out to turn one-of-a-kind “teaching moments” into a product.  

With $500K in funding secured, Rogier just needed high-profile experts to create educational content around. Luckily, he was friends with Dustin Hoffman’s daughter and brought the actor on board along with fiction writer James Patterson, who was one of the few experts to respond to his cold calls. 

Today, MasterClass has over 180 courses, each taught by a different expert, whether that’s Bill Clinton teaching “Inclusive Leadership” or Bill Nye teaching “Science and Problem-Solving.” 

MasterClass’s $100M in revenue comes solely from its tiered annual subscription plans:

• Individual– $120 per year and gives access to the entire course catalog, class forums, and guides. 

• Duo– $180 per year and allows users to watch courses across two devices simultaneously and provides offline video access.

• Family– $240 per year and permits use across six devices in addition to the Duo benefits.

MasterClass is also looking to expand into B2B sales with MasterClass at Work. Subscribed employers pay $180/year per employee, which is higher than the base individual subscription plan. They justify the high cost with platform use reports that cover employee engagement and specialty leadership courses.

The Numbers

• 2019 $44.5 million in revenue

• 2020 $88.9 million (pandemic fueled growth)

• 2021 $118.8 million

• 2022 $94.9 million (post-pandemic stagnation)

How They Win: Selling Exclusive Celebrity Content

Despite the name MasterClass, the platform’s courses won’t make you an expert in much of anything. Each course only has 2-5 hours of content split into 15-30 lectures that average 10 minutes a piece. 

To make matters worse, customers seeking a genuine educational experience have been disappointed in the lack of depth in the content. One reporter from Vox described Serena Williams’ tennis course as “just technical enough to be useless to a novice and inane to anyone who has taken a tennis lesson.”

While this is a problem, it isn’t too bad since MasterClass’s primary customer base is more interested in the content for the entertainment value. However, catering to this consumer group is a double-edged sword. 

It leads to massive upswings in subscriptions when fans flock to the platform to see their favorite celebrity’s course. It also leads to a high churn rate as those same subscribers have already seen their star’s content and no longer have use for the subscription– no wonder MasterClass only sells annual subscriptions to lock consumers in!

This is likely the reason that MasterClass is expanding into B2B sales as this model is known to be stickier. 

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