Online courses: It’s not about value, it’s about revenue

June 29, 2012 at 2:41 am 3 comments

Thanks to Valerie Summet for pointing me to this article! I found the argument insightful. Blogs didn’t reduce the value of journalism — they eliminated the revenue streams (which is part of what John Mitchell and Dave Patterson were saying). People still value professional journalism more than citizen journalists, but it’s not still not clear how to pay for it. In higher education, we have a revenue stream problem. Online education doesn’t fix that.

Let’s take the newspapers as an example. Blogs haven’t undermined the newspapers. and get more traffic than any single blog. More people are reading the Times than ever before, in fact. Direct competition from citizen journalists hasn’t been a problem for the news industry. It turns out that most of us prefer our news from journalists. Newspapers don’t have a readership problem, they have a revenue problem. The plague on the newspaper business has come from Craigslist and Google AdWords. Craigslist fundamentally changed the classified advertising business, while Google revolutionized the rest of the advertising market. And once revenues collapsed, news conglomerates could no longer pay off the debts they accrued through a decade of leveraged buyouts and consolidations. Hence, we’re left with newspaper disruption. The same is true with books and even (as my own research shows) with political advocacy organizations. It isn’t direct competition that undermines market leaders. It’s the decline of revenue streams, making it impossible to pay for your old infrastructure.

Revenue problems for public universities are not originating in competition from online learning programs. They’re coming through systematic defunding by state legislatures. Higher education in America faces its share of problems, to be sure. Tuition soars and students are racking up mountains of debt. But the underlying revenue model faces no direct threat. A modern-day Good Will Hunting might gain his education through MIT’s online lectures rather than a Boston public library card, but the great mass of privileged 18-year-olds will keep heading off to college. Neither the University of Phoenix nor MIT’s online courses offer a replacement for the college experience that students are currently paying for. And competition does not equal disruption.

via David Karpf: UVA Board’s Lazy Business Sense.

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3 Comments Add your own

  • 1. dennisfrailey  |  June 29, 2012 at 1:47 pm

    I have to disagree with some of this. The article correctly points out that “It’s the decline of revenue streams, making it impossible to pay for your old infrastructure.” Exactly. The world has changed and we have to change the way we do business in order to survive. The same logic applies to education. It’s the old infrastructure that we can no longer pay for. In other words, universities have to change (although, as many have pointed out, they are among the most hidebound, change-resistant organizations in human society). It isn’t fair to blame state legislatures for reducing their support — they don’t have the money!!! We have to find a way to make education viable under the new conditions presented by today’s culture and technology.

    I happen to have taught using distance education for over 40 years. My approach has been to use this new medium to provide education that better suits a large class of students whose circumstances do not allow them to utilize the traditional, on-campus academic approach. We have been very successful. We didn’t use distance education to reduce cost – we used it to serve a larger customer base. This had the side effect of reducing cost per student somewhat and, thus, of helping a private university maintain its ability to compete against state-supported institutions that were able to offer their services well below cost due to government subsidies. But the point is that the world has changed and we need to change with it.

  • 2. Shannon  |  June 29, 2012 at 9:28 pm

    I think one of the factors that Newspapers are losing revenue is because of the rising Social Media trend and other companies like Yahoo! News, etc.. People nowadays get news from Facebook, Twitter and other sources. I think Newspaper companies should be aggressive and make their presence know in these types of platform.

  • […] piece from the Atlantic. As we mentioned previously, Internet technologies cut into older markets if they impact the revenue stream. So far, MOOCs are not impacting the revenue stream. This article goes further to point out that […]


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