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Martin Barrett
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How Does Masterclass Make Money? [+ Is The Company Fine]

How Does Masterclass Make Money? [+ Is The Company Fine]

MasterClass is a popular online learning platform that offers its students presentations and video lectures from celebrities and experts in different fields.

They offer a variety of classes, including cooking, filmmaking, acting, business, and wellness.

The MasterClass platform makes its money from charging subscription fees to students who want to access the pre-recorded videos and other learning material.

In this article, we answer the rumored question: “Is MasterClass losing money?”, and find out more about the business model of MasterClass. (See our MasterClass review ‘Why Is MasterClass So Expensive? Honest Review‘.)

How Does MasterClass Make Money?

MasterClass has a couple of different ways to make money.

One of their most lucrative revenue stream is charging their customers an annual MasterClass subscription fee.

This allows MasterClass subscribers to gain unlimited access to all MasterClass online courses and any related resources.

The yearly subscription allows MasterClass to create a loyal follower base and also secure an income stream for a year.

This being said, MasterClass also allow consumers to buy a single course subscription that gives them access to just one class. (Read more about the MasterClass subscription fee ‘here‘)

The MasterClass Business Model

The MasterClass online education platform was founded by two American entrepreneurs in 2014.

The business has seen significant growth in the last years, with an average evaluation of $800 million.

This growth is thanks to a solid business model that helped MasterClass increase subscriber numbers.

Tiered Pricing System

Similar to other e-learning platforms, MasterClass has a tiered pricing structure that offers customers an annual subscription for unlimited access or a one-off fee for access to a single course.

What makes MasterClass more unusual is the high price point.

They charge a significantly greater amount of money than their competitors, such as Udemy or Skillshare.

MasterClass justifies this higher price tag with high-quality videos and celebrity teachers. (See ‘Masterclass Vs Udemy – Honest Review And Worth 2022‘.)

Industry Experts And Celebrities As Instructors

MasterClass set itself apart from other online learning spaces with its focus on celebrity teachers and experts who are the best in their field.

This helps MasterClass spread the word about its classes through word-of-mouth on social media and in news publications.

This being said, celebrities are also extremely costly.

While MasterClass hasn’t published official figures for these celebrity deals, it is estimated that MasterClass instructors receive $100,000 upfront and 30% of the course revenue.

Classes Are Aimed At Casual Learners

MasterClass courses are aimed at casual learners who want to know the basics about a topic. There is no career acceleration or progression.

These classes all focus on the instructor, rather than practical advice.

For example, a class with Tony Hawk only teaches you some skateboarding tips and tricks but it won’t teach you how to skateboard like a pro.

MasterClass Funding

MasterClass is a privately funded company. They have raised over $240 million in several rounds of venture capital funding so far.

In 2020, they managed to set their valuation at $800 million after funding series E which was led by Fidelity Investments.

In 2021, MasterClass received a further $225 million in a series F funding round. This allowed the business to set its valuation at $2.75 million.

Some of their biggest investment companies are New Enterprise Associates, Atomico, and Institutional Venture Partners. MasterClass has over 40 investors.

Is MasterClass Losing Money?

Is MasterClass Losing Money?

MasterClass doesn’t publish any official loss figures. However, the business is privately funded and goes through regular funding rounds during the current growth period.

This means that MasterClass is likely losing money as they keep reinvesting any profits into the business to accelerate growth.

The Key To MasterClass’ Success

MasterClass has seen its valuation triple in 2021. This is a sign of the strong growth of the business.

While the different funding rounds with a variety of investors helped MasterClass to raise more money, the MasterClass concept is the reason why the company is so successful (see also ‘What Is The Concept Of Masterclass?‘).

Here are some of the elements that entice investors to invest in MasterClass.

Education And Entertainment

One of the core ideas of the online education platform is that MasterClass courses combine education with entertainment.

This is thanks to the many celebrity experts that MasterClass hires to present their courses.

The celebrity hype brings in fans and new interested audiences that MasterClass might not otherwise reach.

In addition, MasterClass customers get full access to and can watch MasterClass videos and other course materials that are specifically designed with the style of the celebrity teacher.

The video lessons also allow subscribers to get a glimpse into the celebrity’s work and home life as they are typically filmed in the teacher’s home.

High-Quality

MasterClass focuses fully on providing high-quality courses across the board.

This starts with the professional pre-recorded videos and also shows in the well-designed workbooks that come with every MasterClass course.

This premium quality on all levels is what makes MasterClass stand out from many competitors’ online learning platforms.

Marketing Through Word-Of-Mouth

Having a number of celebrity instructors on board helps MasterClass accelerate its marketing simply through word of mouth.

Celebrities and world-renowned experts have a large influence in their field and they come with a lot of social media followers.

This has increased MasterClass’ brand awareness over the years and it also slightly reduced their marketing spend.

Detailed Market Research From The Start

When entrepreneur David Regier founded this online learning platform, he didn’t start out with an empire. Instead, he wanted to test the market first.

For this, he started with market research. Regier spoke to a lot of people to find out more about their educational experiences.

He asked questions, such as what topics learners are most interested in and how they want to learn.

This initial research helped Regier to create the MasterClass vision and concept.

However, his first videos weren’t very good quality. That’s why Regier reached out to a variety of influential filming friends to create some Hollywood-quality videos.

MasterClass Expenses

While MasterClass generates a significant amount of revenue every year, the company also spends a lot. Here are some of the greatest expenses that MasterClass has.

Celebrity Payments

One of the biggest expenses for MasterClass is to hire expert instructors.

While the celebrity deals aren’t disclosed, it is believed that MasterClass pays their teachers $100,000 up front and a 30% revenue share of their classes.

Looking at the many celebrities that MasterClass has already engaged, they likely have spent millions of dollars on just employing their teachers.

This being said, there is a lot of provenance coming with their famous instructors.

They have their own social media following which opens up great marketing opportunities for MasterClass.

Production Costs

MasterClass creates high-quality videos, brochures, and materials to make up their online classes.

These professional production costs are extremely high as it requires an expensive team to put all these materials together.

Marketing Expenses

Just like any other business, MasterClass spends a significant amount of money on marketing. This includes a large variety of social media ads as well as Google paid ads.

They are likely to employ a marketing agency or an in-house marketing team which is costly.

Final Thoughts – Is MasterClass Fine?

MasterClass has seen consistent financial growth in the last few years. The business continues to invest its profits back into getting more users onto its platform and on the MasterClass app.

With currently 1 million subscribers, MasterClass still has a lot of catching up to do with their competitors on user figures.

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