Just received the latest University Ventures letter with a piece, “You Won”, by Daniel Pianko. He explains that his tenured professor brother has acknowledged the future is online and that #highered is going to get whipped by educational equivalents of Amazon and Uber:
As colleges and universities face off against new technology, how does this game compare with the one retailers and taxi drivers have been playing?
It’s true that three million American students – nearly 1 in 6 enrolled at colleges and universities – are earning degrees entirely online, without setting foot on campus. But they are doing so at accredited universities (nearly all regionally accredited). Students haven’t fled the system for an Uber- or Amazon-alternative. Overall enrollment is up 18% over the past 5 years. And new private sector universities (i.e., publicly traded companies like Apollo Group, parent of University of Phoenix), which had seemed on a path to market domination, have experienced enrollment declines.
At the same time, my brother sees clouds on the horizon. As Ben Nelson, the founder of the Minerva Project, explained to me, about 100,000 students at the University of California and California State University systems take Psychology 101 each year. Psychology 101 is a first year lecture class with, on average, over 200 students in each class. That’s 100,000 students, at an average of $1,500 of revenue per student per class. So Psych 101 generates $150M in revenue at a cost of delivery that can’t possibly exceed $50M. As a result, the California systems generate $100,000,000 of gross margin (i.e., profit) on Psych 101 – a contribution that is used to support other activities in the systems. What happens, my brother rightly and fairly asks, when new entrants like StraighterLine and UniversityNow push the price UC and CSU can charge for Psych 101 to the actual cost of delivery? What will UC and CSU have to cut?
That last question… what goes away? Is that the only question? How about… what can get added that people will pay for? Or are their new customers for the traditional goods (face to face interactions, dorms, extra curricular activities?). There is lots of opportunity out there!