“MOOCs are the monster under the bed!” boomed a Dean at an academic conference just over two years ago. “And soon, they are going to come out and get us all!” Two years on and the idea of revolutionary change in higher education seemed to have been mitigated somewhat. The 2014 EFMD Annual Conference in Vienna brought out a more moderated view suggesting that they would make a contribution to teaching and learning, but they would in not way replace the traditional university. Sense at last. If MOOCs are the monster, perhaps they, or at least their underlying business model, are more of the Loch Ness variety. Talked about by many, but very difficult to find.
For an industry that is proud to trace it heritage back to Aristotle and Socrates, we have a surprising penchant for getting in a flap about the latest technology. MOOCs have been a point in case though finally after a few years things seem to be settling again. After my return from the EFMD Annual Conference last week, my colleague from Durham University, Philip Warwick (who has written several times for this blog), summed things up in one short mail. “ I didn’t get time to read all of your posts in detail.” he confessed. “But the general idea that I got was that we don’t need to be as scared of MOOCs as we used to be.” Absolutely.
At the conference, Martin Schader gave a very down to earth view of MOOCs and their impact on higher education. Yes, they are developing, but we are now starting to get some perspective on their impact. They are an addition to education and learning rather than being something that will totally revolutionise it. As Mr. Schader pointed out, when any new technology comes along, there is a tendency to get caught up by the hype to begin with and then to go through a cycle of readjustment. This begins with over inflated expectations of what can be done, plunges towards total disillusionment before climbing back to a position where there can be meaning production and use of the technology. We are perhaps now moving into this area. The question that remains however is the one of the economic model. This still seems harder to grasp.
The Economic Model
It seems strange that for all the discussion of MOOCs in the past few years, the economics of it seems to have been forgotten. The basic question is how do you make money when you are giving the course away. On the one side you have the dedicated MOOC providers such as EdX, Coursera, Udacity etc. In his outline of the activities of Coursera, Vivek Goel, was clear on this. Each course can cost up to $200 000 with an average cost of $30 000. The company does not charge for signing up to the course, but makes its profit from the $50 it charges for a certificate from the university once the course has been completed. This seems like a standard micro purchasing model and is easy to understand.
For business schools, however, the model seems less clear. Generating money from a MOOC still seems difficult for two reasons. Firstly, there is the question of barriers to entry. As far as MOOCs are concerned, these are practically zero. There are potentially several hundred thousand professors in the world that could potentially create a “MOOC” with just an iPhone. For sure, the quality would not be as good as a $200 000 production, but is might still get the message across. Secondly, switching costs are also very low (a student can zap from one short MOOC to another with little difficulty which is not the case in traditional learning). So, lots of people can provide “MOOCs” easily and cheaply and the low switching costs means students can move as soon as they are asked to pay. In this context, it seems large to envisage how a school can break even on the provision of a MOOC.
Opportunity Cost in MOOCs
This is an important (and largely ignored) issue because there is the real question of opportunity cost. If a school wants to invest tens of thousands of euros on making a MOOC, it should be able to justify some return on investment. Otherwise, it can use that same money to buy in professors, equip rooms etc. Interestingly, the main argument that was put forward was one of advertising for the institution. By offering a MOOC in a niche area that corresponds to the speciality of the school, indirect publicity can be generated leading to more applications to the school in the traditional manner. Again, there is some logic to this though it does seem rather ironic because advertising has traditionally been one of the most difficult expenses to justify.
Perhaps then higher education is now ready to move into the next phase which will entail the more formalized structuring of MOOCs. On the one side, there will be the large players with a total dedication to providing MOOCs and on the other higher educational institutions which will offer niche market programmes in order to generate greater awareness of their specializations rather than to generate profit. This at least would seem to be a business model and industry structure that is reflected elsewhere. It might not be as exciting as the tales of revolution but at least it is more real than some of the (Loch Ness) monsters we have been searching for over the past few years.
We had the pleasure to meet Mathieu Nouzareth, a serial entrepreneur and former student of both GEM and Pace University. He is currently CEO and founder of Fresh Planet, a company of social gaming developing games for Facebook.