Startup Library: Sewing with Sara Alm on Craftsy.
July 15, 2017 5:03 pm EST: We’ve changed the title of this article to make it more clear that Craftsy will be adding an additional membership option, not taking away the a la cart purchasing option and customers will be able to keep the classes they’ve already bought. We’ve also added additional information about pricing, distribution, and instructor compensation as it became available.
In a letter signed by CEO John Levisay and sent to instructors yesterday, Craftsy announced that it will begin offering a subscription payment model beginning in 2018 in addition to the current a la carte model. “While some people love our in-depth tutorials, many people who aren’t currently using Craftsy find our a la carte only model to be a barrier and want to engage with our content in a variety of ways,” the letter stated. Craftsy learned what those barriers were during a consumer insights study conducted last year. Many changes have resulted from that study including a sight redesign last summer that better integrated supplies with classes and patterns, and the launch of DVDs earlier this year. Membership allows customers to binge watch many hours worth of videos over a weekend, for example, without the barrier of deciding what to watch and purchasing additional materials.
The new membership model will allow consumers to stream the entire Craftsy online class catalog for a monthly fee with the option of purchasing a class to keep at an additional cost using an “Own Forever” feature. This model is similar competitor Creativebug’s subscription model which is priced at $4.95/month. JoAnn purchased a majority share in Creativebug earlier this year. Information is not available yet on Craftsy’s membership pricing, although in a video call with instructors on Friday Levisay stated that membership would definitely be more than $2/month. Such a low cost membership fee wouldn’t be sustainable with the company’s large marketing spend per class. Currently Craftsy classes are priced individually and range from $9.99-69.99 under the a la carte model.
In May it was announced that NBCUniversal had bought a majority share in Craftsy for around $230 million. The instructor letter from yesterday emphasized the importance of this acquisition in exposing Craftsy content to new customers. “Given our new relationship with NBCUniversal, we are going to be able to reach new audiences at a scale previously unavailable to us,” it stated. In the video meeting Levisay emphasized that a membership model will allow the company to expand into English speaking markets outside of the US and, over time, with translation services in place, expand into the non-English speaking world. Levisay also indicated that Craftsy content could run on other video platforms. “You know what these platforms are,” he said, perhaps pointing to currently existing streaming services (although he stopped short of naming any in particular). On these platforms viewers would be able to watch Craftsy videos, but not download course materials such as patterns.
During the call Levisay and Danielle Wilkie, Head of Growth, explained that the membership product is still being built. The alpha test will begin shortly with a few hundred users and beta will launch in the fall. Craftsy experimented with membership once before, in October of 2015, and Levisay says the consumption rates for video classes were “very high,” although the company failed to be upfront with instructors regarding the compensation model during that trial run leading to some feelings of distrust.
Instructors will be issued new contracts at the end of next week. Royalty percentages will remain the same and membership payouts will be figured based on minutes watched. Longer classes will have more available minutes to watch meaning more possible revenue earned. In the video call Levisay stated that his hope is for membership to triple or quadruple the size of the overall business.