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Why Masterworks's Business Model is so successful?

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Masterworks’s Company Overview


Masterworks is a pioneering platform in the art investment industry, democratizing access to fine art as an alternative investment class. Established in 2017 by Scott Lynn, the New York-based company allows investors to buy shares in a painting, much like stock in a company. Masterworks handpicks high-value, blue-chip art from acclaimed artists such as Banksy, Monet, and Warhol, and offers them to its community of investors. The company's mission is to provide a new level of access to art investments, which were traditionally only available to the ultra-wealthy. Masterworks operates with a transparent model, providing investors with comprehensive data and research about each artwork's potential return on investment. Business Model: Masterworks operates on an innovative business model that disrupts the traditional art market. The company acquires high-value artworks from auctions or private sales and then files them with the SEC (Securities and Exchange Commission) to create an IPO (Initial Public Offering) for each artwork. Once approved, these shares are made available to investors on the Masterworks platform. The investors can then buy shares in a particular artwork and become fractional owners. This model allows Masterworks to democratize the art investment industry, making it accessible for individuals who may not have the means to purchase a high-value artwork outright. Revenue Model: Masterworks' revenue model is two-pronged. Firstly, the company charges a 1.5% annual management fee on the total value of each artwork. This fee covers the costs of storage, insurance, and maintenance of the artwork. Secondly, when an artwork is sold, Masterworks takes a 20% commission on the profit made from the sale. The remaining 80% of the profit is distributed among the shareholders. The company also generates revenue from the appreciation of the artwork over time. The longer the artwork is held, the more it appreciates, and consequently, the higher the return on investment for both Masterworks and its investors.

https://www.masterworks.com/

Country: New York

Foundations date: 2017

Type: Private

Sector: Financials

Categories: Financial Services


Masterworks’s Customer Needs


Social impact:

Life changing: heirloom, affiliation/belonging

Emotional: provides access, design/aesthetics

Functional: simplifies, makes money, reduces risk, informs


Masterworks’s Related Competitors



Masterworks’s Business Operations


Alternative currencies and banking:

Alternative currencies (also known as private currencies) are units of value issued by a private entity, such as a business or a non-profit organization. A private company or organization usually produces a private currency to serve as an alternative to a national or fiat currency, usually the country's standard unit of value. For example, mutual credit is a kind of alternative currency, and therefore any loan that does not go via the banking system qualifies as an alternative currency.

Digital transformation:

Digitalization is the systematic and accelerated transformation of company operations, processes, skills, and models to fully exploit the changes and possibilities brought about by digital technology and its effect on society. Digital transformation is a journey with many interconnected intermediate objectives, with the ultimate aim of continuous enhancement of processes, divisions, and the business ecosystem in a hyperconnected age. Therefore, establishing the appropriate bridges for the trip is critical to success.

Combining data within and across industries:

How can data from other sources be integrated to generate additional value? The science of big data, combined with emerging IT standards that enable improved data integration, enables new information coordination across businesses or sectors. As a result, intelligent executives across industries will see big data for what it is: a revolution in management. However, as with any other significant organizational transformation, the difficulties associated with becoming a big data-enabled company may be tremendous and require hands-on?or, in some instances, hands-off?leadership.

Fractional ownership:

Fractional ownership is a popular investment arrangement for high-value assets like airplanes, automobiles for racing, and vacation homes. The main distinction between fractional ownership and timeshare ownership is that investors own a portion of the property rather than time units. Thus, if the asset's value rises, the value of the investment's shares increases as well.

Spectrum retail:

Utilizes a multi-tiered e-commerce approach. The firm first focused on business-to-consumer connections with its customers and business-to-business ties with its suppliers. Still, it later expanded to include customer-to-business transactions after recognizing the importance of customer evaluations in product descriptions. It now also enables customer-to-customer transactions by establishing a marketplace that serves as a middleman for such transactions. The company's platform enables nearly anybody to sell almost anything.

Experience selling:

An experience in the sales model describes how a typical user perceives or comprehends a system's operation. A product or service's value is enhanced when an extra customer experience is included. Visual representations of experience models are abstract diagrams or metaphors derived from recognizable objects, actions, or systems. User interfaces use a range of experience models to help users rapidly comprehend what is occurring in the design, where they are, and what they may do next. For example, a software experience model may depict the connection between two applications and the relationship between an application and different navigation methods and other system or software components.

Revenue sharing:

Revenue sharing occurs in various forms, but each iteration includes the sharing of operational gains or losses amongst connected financial players. Occasionally, revenue sharing is utilized as an incentive program ? for example, a small company owner may pay partners or colleagues a percentage-based commission for recommending new clients. Occasionally, revenue sharing is utilized to share the earnings generated by a corporate partnership.

Market research:

Market research is any systematic attempt to collect data about target markets or consumers. It is a critical aspect of corporate strategy. While the terms marketing research and market research are frequently used interchangeably, experienced practitioners may want to distinguish between the two, noting that marketing research is concerned with marketing processes. In contrast, market research is concerned with markets. Market research is a critical component of sustaining a competitive edge over rivals.

Disruptive trends:

A disruptive technology supplants an existing technology and fundamentally alters an industry or a game-changing innovation that establishes an altogether new industry. Disruptive innovation is defined as an invention that shows a new market and value network and ultimately disrupts an established market and value network, replacing incumbent market-leading companies, products, and alliances.

Online marketplace:

An online marketplace (or online e-commerce marketplace) is a kind of e-commerce website in which product or service information is supplied by various third parties or, in some instances, the brand itself, while the marketplace operator handles transactions. Additionally, this pattern encompasses peer-to-peer (P2P) e-commerce between businesses or people. By and large, since marketplaces aggregate goods from a diverse range of suppliers, the variety and availability are typically greater than in vendor-specific online retail shops. Additionally, pricing might be more competitive.

Ultimate luxury:

This business approach is based on product distinctiveness and a high level of quality, emphasizing individuals with significant buying power. The expenditures required to create distinction are covered by the comparatively high prices charged, which often allow for very high profits.

Equity crowdfunding:

Equity crowdfunding refers to the online sale of private business stocks to a pool of investors. Investors provide money to a company in exchange for a stake in that business. If a company succeeds, its value increases, as does the value of a stake in that business ? and vice versa. Because equity crowdfunding includes investing in a commercial company, it is often regulated by securities and financial authorities.

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