Higher education: The attack of the MOOCs

an army of new online courses is scaring the wits out of traditional universities. But can they find a viable business model? – Published on The Economist, July 20, 2013.

DOTCOM mania was slow in coming to higher education, but now it has the venerable industry firmly in its grip. Since the launch early last year of Udacity and Coursera, two Silicon Valley start-ups offering free education through MOOCs, massive open online courses, the ivory towers of academia have been shaken to their foundations. University brands built in some cases over centuries have been forced to contemplate the possibility that information technology will rapidly make their existing business model obsolete. Meanwhile, the MOOCs have multiplied in number, resources and student recruitment—without yet having figured out a business model of their own. 

Besides providing online courses to their own (generally fee-paying) students, universities have felt obliged to join the MOOC revolution to avoid being guillotined by it. Coursera has formed partnerships with 83 universities and colleges around the world, including many of America’s top-tier institutions.

EdX, a non-profit MOOC provider founded in May 2012 by Harvard University and the Massachusetts Institute of Technology and backed with $60m of their money, is now a consortium of 28 institutions, the most recent joiner being the Indian Institute of Technology in Mumbai. Led by the Open University, which pioneered distance-learning in the 1970s, FutureLearn, a consortium of 21 British, one Irish and one Australian university, plus other educational bodies, will start offering MOOCs later this year. But Oxford and Cambridge remain aloof, refusing to join what a senior Oxford figure fears may be a “lemming-like rush” into MOOCs.

On July 10th Coursera said it had raised another $43m in venture capital, on top of the $22m it banked last year. Although its enrolments have soared, and now exceed 4m students, this is a huge leap of faith by investors that the firm can develop a viable business model. The new money should allow Coursera to build on any advantage it has from being a first mover among a rapidly growing number of MOOC providers. “It is somewhat entertaining to watch the number of people jumping on board,” says Daphne Koller, a Stanford professor and co-founder of Coursera. She expects it to become one of a “very small number of dominant players” … //

… Sceptics point to the MOOCs’ high drop-out rates, which in some cases exceed 90%. But Coursera and Udacity both insist that this reflects the different expectations of consumers of free products, who can browse costlessly. Both firms have now studied drop-out rates for those students who start with the stated intention of finishing, and found that the vast majority of them complete the courses.

Besides LearnCapital, a Silicon Valley venture firm, and the World Bank’s International Finance Corporation, the participants in Coursera’s $43m fund-raising included Laureate, an operator of for-profit universities. Doug Becker, its boss, reckons that many established universities will soon offer credits towards their degrees for those who complete MOOCs. He thinks this will drive a dramatic reduction in the price of a traditional higher education, that will reduce the total revenues of existing providers by far more than the revenue gained by the start-ups. Still, if MOOCs reduce the cost of higher education by one-third, as he predicts, yet only earn for themselves 1% of that benefit, that would “still be a very nice business,” he says.
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Links:

Massive Open Online Course MOOC on en.wikipedia with it’s External links and further reading;

MOOCs on Google News-search;

Massive Open Oline Course MOOC: Top 10 Sites for Free Education With Elite Universities; on BDPA Detroit Chapter, not dated,  inclusive a video: What is MOOC, 4.27 min.

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