To grow the cash cow for tomorrow – why MOOCs?

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This is a second piece of economic analysis for my series of MOOCs vs. Online Degree Program, from university point of view. MOOC courses require higher development cost and lower delivery cost, compared to an online degree program course. A return on investment analysis shows an online degree program recoups money must easier much faster. So why on earth, so many universities got into MOOCs? 

According to Wharton School’s 2014 study, an average MOOC course takes 

  • Development cost of US$70,000 (US$20,000 goes to production cost)
  • Delivery cost of US$7,000

Another study by North Carolina General Assembly study in 2010 shows that to run a distance learning program course, the cost pattern reverses

  • Development cost of US$5,387
  • Delivery cost of US$17,564

It costs much more to develop a MOOC course but much less to deliver one. There are several reasons to explain the situation. 

Firstly, during course development stage, a MOOC course requires pedagogical redesign and production. Most educators will have to re-think the whole experience of designing a massive open course, which probably includes significant chunk of video materials. At the same time, an online degree program course might be based on existing campus course which does not necessarily require videos as part of the content materials. 

Secondly, during course delivery stage an online degree program student demands more support and handholding services. Since students are paying tuition, universities might be obliged to provide extra tutoring or administration services. Meanwhile since a MOOC course learner is not paying, they most likely would not expect the same level of support.  

What is the return for investment for universities to deliver a course online?

Let us take a look at variable cost first- the cost to deliver a course. 

To cover the delivery cost, a MOOC course shall have at least 350 learners purchasing a certificate (assuming a certificate charges US$20), to reach breakeven point. If 5% of a MOOC course learner buys a certificate, a course shall expect 7,000 learners to make the number work.

To cover a delivery cost for distance, for credit online course, a program needs 18 students (assuming a student pays US$1,000 per course, see my previous analysis for learner cost analysis blog. For a prestige university, getting 18 students for an online degree program is not an unreasonably goal. An online degree program, therefore, can be a cash cow.

CashCow

A MOOC course requires higher upfront investment to develop, has less prospect to generate positive cash when it is delivered. Why, then, does the university get into MOOC business especially if it already has a cash cow – online degree program?

I believe a lot of it is due to the emerging global nature of education and a cash cow program needs to be further groomed for tomorrow’s higher education. MOOC is a way for programs to market to a global audience, for university to experiment what works in a more diversified classroom and to develop research based on a global database. My blogs will continue this discussion, by comparing the many differences between these two and their increasing blurring between them.

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