Just as one company’s success shouldn’t cast a halo on its vertical’s brethren, one company’s layoffs don’t quite mean that its competitors are equally screwed. Instead, I think that changes within a particular startup can be used as benchmark questions for their larger market; in other words, we can use the micro to better understand the macro.
With that in mind, I want to talk about MasterClass’ decision to lay off 20% of its staff, around 120 people, across all teams. The workforce reduction, per CEO David Rogier on Twitter, was made “to adapt to the worsening macro environment and get to self-sustainability faster.” Put differently, the company — which sells subscriptions to celebrity-taught classes — is in search of operating discipline and needs to cut staff in order to get there.
The layoffs place a spotlight on the premise behind MasterClass. When I first covered the company in March 2020, I got stuck on its pitch of aspirational learning.
[MasterClass] also touches on the public’s innate curiosity about how famous people think and work. MasterClass tugs on that idea a bit by also offering classes that fundamentally do not make sense to be “digitized.” Think high-contact sports, like a tennis lesson from Serena Williams or a basketball lesson from Steph Curry. Or just general pontifications from RuPaul on self expression and Neil deGrasse Tyson on scientific thinking and communication.
Despite its flashy lineup of stars, MasterClass doesn’t sell access but instead sells a window into someone’s work diary. Celebrities are not interacting with students on a day-to-day basis, and sometimes, not at all.
Around a year later, I returned to this idea while trying to extract what MasterClass’ prominence meant for edtech. Fiveable founder Amanda DoAmaral said at the time that MasterClass raises the bar for content quality across all of edtech, while Toucan founder Taylor Nieman pointed out that MasterClass faces the same issues “as so many other consumer products that try to steal time out of people’s very busy days.”
So what is MasterClass? A high bar for edtech quality? Or a more educational Netflix?
As part of the layoff, a company spokesperson pointed toward a focus on hiring for MasterClass for Work, an enterprise-focused operation that is meant to help with employee retention. Financially, it makes sense to focus on a sticky customer such as an employer — but that could also require a key pedagogical change if employees aren’t motivated by the platform’s pep talks.
Fast-forward to today, and I’m wondering what it means for MasterClass to reinvent itself, years into a pandemic, with a focus on self-sustainability (i.e., making more revenue while cutting costs). To date, the company’s core value proposition is built around people wanting to learn from experts who aren’t necessarily educators. Does that age well when consumers have less appetite for discretionary spending? Can the company make entertainment essential? Do celebrities have enough allure, consistently, to warrant an annual subscription? Note that one of MasterClass’ co-founders left to start a company to apply MasterClass’ high-quality videography to college classes (talk about the opposite of light-lift learning).
Edtech may have been able to avoid answering these questions for years thanks to venture capital and a market that moved in its direction, but now, as layoffs begin to sprinkle in, it seems the questions are answering themselves.
In some ways, it’s a boring story; proving utility and promoting engagement simultaneously has always been edtech’s toughest nut to crack. Yet, as layoffs pop the bubble on how long it may take for companies to prove their worth, the sector may be overdue for a MasterClass in change.
This is not an edtech phenomenon. For the startup market at large, the cat is out of the bag. Every startup is looking for ways to run a cleaner, more efficient business and that may take a lot of unlearning, as well as the disappearance of business models built on assumptions that never really played out.
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