MasterClass Review – How to monetize knowledge-based web traffic

For folks who don’t know, MasterClass is a media start-up that offers online classes from the world’s best in each category. It has raised $136M so far and was founded in 2012 by Aaron Rasmussen and David Rogier. Neither of them really had any media or education background. I’m not sure whether they had any special connections to these best talents.

MasterClass Online Classes

Given the WFH situation, I guess they are seeing a huge uptick in their new sign-ups. I clicked on ads from my Facebook timeline and decided to sign up.

It’s fairly expensive: $180 for an annual membership. For a limited time only, they offer “buy one share one free” campaign (so, the actual price is $90 per account). That’s still $7.50 per month. It’s more expensive than Disney+ and Hulu Basic. The key question is whether MasterClass is worth the money.

MasterClass has significantly less content than other SVOD services. Currently, MasterClass offers 85 classes, each of which runs for about two to three hours. So, the total amount of content is about 212.5 hours. Hulu has 85,000 TV episodes, or roughly 68,000 hours, which is 320 times the offering of MasterClass. Disney+ has 7,000 TV episodes, which is still 26 times the offering of MasterClass.

MasterClass’s production cost is much lower than that of a typical TV series. It’s very impressive that MasterClass has been able to attract top talents such as Gordon Ramsay, Stephen Curry, and Serena Williams. However, I don’t think its fee is higher than the top Hollywood talents. MasterClass does offer very high-quality video production but, compared to most TV series, it’s still amateur.

You might argue that it’s unfair to compare a class to a TV series. Unlike other online education platforms, MasterClass offers only video series (with maybe one PDF per class). There is no TA, no interactive quiz, and no community for students. So, it’s really more of a media company.

If MasterClass’s key value really lies in the instructors it can attract, I’m not exactly sure why it invests a huge amount of effort into producing these videos by itself. This increases the lead time and limits the size of its catalog. Why not make it an audio platform for top talents to upload their own content?

Let me introduce another platform, called “Dedao,” from China. It offers subscription content from top talents in China. It has both video and audio but most of it is self-produced by the talents. The platform has close to 200 classes and more than 2,000 audiobooks. Based on the few classes to which I subscribed, I estimate that each class generates an annual revenue of about $1-1.5M for the platform. Assuming the platform takes a 30% fee, Dedao’s net revenue should be around $100M. This must be much higher than MasterClass’s revenue—and Dedao’s COGS is much lower.

App Insights: 得到-知识就在得到| Apptopia

If you are still interested in subscribing to MasterClass, here are some classes I enjoyed.

Gordon Ramsay

David Axelrod and Karl Rove

Jeff Goodby and Rich Silverstein

Is T-Mobile 5G really faster than its 4G-LTE?

Last week, I got a new OnePlus 8 phone, which is one of the very first 5G phones available in the US. Luckily, I use T-Mobile, which doesn’t charge an additional fee for the 5G network.

Maybe there is a reason why none of T-Mobile 5G’s commercials say anything about its speed. Based on my test, T-Mobile 5G is really not faster than its 4G-LTE. Therefore, the benefits for the average consumer are very limited.

T-Mobile claims only that it’s better than other 5G networks. Nowhere on its website does it say that it’s faster than 4G.

According to T-Mobile, these are the expected speeds of the 4G LTE Network (On-Device):

  • Download speeds: Typically between 9 – 47 Mbps, with minimum expected speeds of less than 0.1 Mbps
  • Upload speeds: Typically between 4 – 20 Mbps, with minimum expected speeds of less than 0.1 Mbps
  • Latency: Typically between 30 – 50 ms

For whatever reason, my 4G is much faster than the official T-Mobile speed (thank you, T-Mobile). However, 5G is not really faster than 4G, especially for download speeds.

I’m pretty disappointed with this performance. Following is what Intel claims on its website:

  • Peak 5G speeds are expected to be up to 100x faster than the speed of 4G LTE networks.
  • Reduced latency will support new applications that leverage the power of 5G, the Internet of Things (IoT), and artificial intelligence.
  • Increased capacity on 5G networks can minimize the impact of load spikes, like those that take place during sporting events and news events.

Of course, Intel is lagging behind in this 5G war, so maybe it just doesn’t know how fast it can be…

Every year at CES, I have heard multiple times that the next big thing is 5G. If the speed and latency are not that different from 4G, I guess there is really no immediate impact on consumers’ user behavior on the smartphone—at least, not the current 5G deployed in the US.

I hope 5G does have some impact on IoT and more devices will be connected to each other. Otherwise, I’m not sure how to justify the huge investment into 5G. T-Mobile alone invested $30Bn into it.

By the way, 5G in China seems to achieve much faster download speeds (300 Mbps to 1G Mbps). Maybe there are many different flavors of 5G networks. I’m glad that at least my 5G is faster than AT&T’s “5G E” connections.

Are we going to have more new shows each year?

We live in an era of information explosion. At our current pace, 2.5 quintillion bytes of data are being created each day—and that pace is only accelerating with the growth of the Internet of Things (IoT). According to Forbes, 90 percent of the data in the world was generated in the last two years alone.

The media industry is no exception. Over the last 10 years, the number of new original shows has been increasing at a rapid pace (2.5X in 10 years). One big driver of this explosion is the emergence of OTT apps. At this point, at least 200 OTT apps are offering various streaming services. Will this trend continue or we will see a decline in the number of new original shows? This is the key question I will try to answer.

An interesting thing is that the audience is not necessarily watching more shows. Although the number of available titles has significantly increased, the average number of channels that each person watches actually decreased from 17.3 in 2008 to 12.7 in 2018. Also, the total video time spent per day per person (including OTT) has been very stable since 2012. The Average Time Spent per Day with Major Media per person in the US is around 12 hours. Given that there are only 24 hours in a day, and that we need to spend seven to eight of those hours sleeping, I think it’s very unlikely that we can spend more time with media beyond the current level.

All the data suggest that the demand from the audience reached its peak a few years ago. The audience cannot consume more media or video. The only reason we have more original shows each year is because of competition on the supply side. As the streaming war heats up, programming expenses increase quickly.

The production cost for high-quality content is very high. I will do a deep-dive in another blog post. At this high level, the costs are $200K-$300K per minute. The funding of production costs comes from ad revenue, subscription revenue, or cable subscription revenue. None of these revenues is growing at a rapid pace. For these reasons, we have to believe that, at some point, the number of new original shows per year will start to decrease. Right now, major media companies are maximizing their financial leverage to compete with each other, but this situation is not sustainable.

Maybe we can learn from the app industry, which heated up a few years before the OTT industry did. The number of new apps and games released (iOS only) peaked in 2016. After that, it started to decrease.

Interestingly, 2016 was the year when the smartphone market pretty much stopped its growth.

Based on research from Google/Ipsos, the average number of apps installed on a phone is 35 in the US. We use only nine apps per day. I guess most of those nine apps are very similar across all of us.

After the iPhone was launched in 2007, Apple experienced massive growth (more devices and more demand for apps). This led many app developers to tap into the space and compete with each other. However, as the growth of the market slowed down, only the strongest players could survive. As a result, the total number of new apps released is decreasing.

So, most likely, what happened in the app industry will happen in the video industry. 2019 might be the year that saw the highest number of new original shows. Because the audience demand peaked a couple of years ago, I believe we will see more consolidation in the industry in the next few years and that the number of new original shows will return to the 300-400 range.

Quibi’s future – Premium Video is expensive to produce

Quibi launched in the US a few weeks ago. They plan to bring premium video production quality to a small vertical screen. The concept is very interesting. Unfortunately, due to the current COVID-19 situation, more people might prefer to watch it on the TV screen.

Quibi is right. There is a huge gap in the production cost depending on the quality of video. I did an analysis to compare the different formats. The data are not super accurate but should tell a good story directionally.

The data show that $100K per minute is the low end of the premium video production cost. However, $100K is still 100 times higher than the YouTube product cost. Plus, the video production cost is significantly higher than that for other media formats. If we assume that it takes longer than one hour to read a book or magazine, then, on a per-minute basis, the gap is even bigger.

The only exception might be games. The average game development cost is getting close to $100M. This number is very similar to that of a typical blockbuster movie made in Hollywood. Of course, the average gamer spends a much longer time per game title as compared to movies.

As technology (e.g., VR, AR, 4K, etc.) continues to evolve, I believe that the premium video production cost will only increase. I also predict that, to reduce the risk to the media business, the price of popular IP will continue to increase as well. As a result, the production cost for premium video will get even higher. It will eliminate many small players and accelerate industry consolidation.

To stay in the business, each player must invest tons of cash. Interestingly, each major player in the video space relies on a very different source of revenue. Netflix is mainly subscription-based. Hulu is advertising plus subscription. YouTube is pretty much advertising. AT&T and Comcast also have telecom businesses. Google (YouTube) clearly has the deepest pocket but their investment into original content is very limited.