Update on MIT OCW Finances – and Click to Enroll!

Sometimes I’m wrong, and I don’t mind admitting when I am. The numbers in Ryan’s article in The Tech yesterday were not terribly representative of the way money has been working at MIT OCW recently. Consequently, the numbers I ran in yesterday’s post weren’t terribly reflective of the current reality, either. (In other words, yesterday’s numbers were wrong.)

In that post I invited people to send me more current information if they had it. Both Ryan and Steve Carson of MIT OCW accepted the invitation and provided more updated financial data. (In his reply, Steve good-heartedly suggested that I’m poor at math. My math was correct based on the numbers in Ryan’s article; I think Steve meant that I should redo my calculations based on more recent numbers.) So here we go.

In an article both Ryan and Steve suggested, called OpenCourseWare: Working Through Financial Challenges, we read:

To date, this effort has been funded by a combination of grant funding (41% of FY 2009 expenditures and 72% of total OCW expenditures since inception), Institute funds (49% in FY2009 and 22% of total to date), and donations and other revenue (10% in FY2009 and 6% of total to date).”

Using the FY2009 numbers, and the total of $3.6M for FY2009, that breaks down as follows:

MIT Internal funds – 49% – $1,764,000
Grants – 41% – $1,476,000
Donations, Amazon.com affiliate revenue, and all other sources – 10% – $360,000

This is a much better scenario for MIT OCW than the one suggested by the overall “since inception” numbers Ryan originally reported in The Tech. Still, 40% is a huge percentage of one’s budget, and MIT OCW is not out of the woods. The articles states:

In the next two years the grant funding that has supported OCW since its earliest stages will run out, and foundations generally do not provide new funding to support ongoing operations. Meanwhile, Institute funding has become tighter with the financial downturn, and like all units at MIT, OCW is under pressure to further reduce its reliance on the General Institute Budget. In the current economic climate, it is increasingly difficult to attract corporate support.

I didn’t realize this, but the article also states that MIT OCW has already cut its production activity in half – from publishing / updating 400 courses per year for five years to now publishing / updating only 200 courses per year.

However, none of the above items are the most interesting thing contained in the report, authored by Cecilia d’Oliveira and Steven Lerman. The most interesting thing of all (to me) was the following:

Proposals for generating revenue based on OCW are also reflected in the Institute-wide Planning Task Force Report [unfortunately, “You must log in to view the report.”]. These ideas include various types of certificate, credit, or degree-granting distance education programs that rely on the OCW materials. At this writing, a pro bono team from management consultants Bain & Company is helping us assess the Working Group’s ideas in terms of their potential for financial return, alignment with OCW’s core principles as well as the perceptions of OCW’s stakeholders and users, and the cost of implementing those ideas.

As you may recall, this past May I wrote a post on The Future of OCW in which I forecasted that:

Every OCW initiative at a university that does not offer distance courses for credit will be dead by the end of calendar 2012.

BYU has already demonstrated a profitable “Click to Enroll” business model where OCW materials are used simultaneously as (1) a public good, and (2) marketing materials for credit-bearing programs. There is anecdotal (but positive) evidence from the Click to Enroll experiments at UC Irvine, the OU UK, and the OU NL (these are described in the BYU study). Reducing the cost of OCW development isn’t enough to make the program sustainable – I still contend that the OCW program has to generate real revenue in order to be sustainable.

If MIT OCW is going to adopt a “Click to Enroll” business model, then chances are that we can stop worrying about its sustainability. In fact, if MIT OCW goes C2E, they can probably become entirely financially self-sustaining, without relying on donations or the institution. They already take the lion’s share of OCW traffic, and despite the nature of their course offerings (e.g., the lowest math they offer appears to be single variable calculus) MIT OCW will likely take the lion’s share of the OCW Click to Enroll revenue, too.

The BYU study found that over 2.6% of all OCW site visitors chose the Click to Enroll option and became paying customers enrolled in formal online courses. Can you imagine the revenue generated by applying BYU’s conversion ratio to MIT OCW’s million visits per month? With a conservative tuition of $400 per class, that’s revenue of over $10,000,000 per MONTH. Even with a terribly low conversion rate of only 0.1%, they would still generate almost $5,000,000 in revenue per year.

As always we’ll all be watching MIT OCW closely and hoping for their success. As the article says, “More than 250 universities have committed to openly publishing course content in the OCW model.” Hopefully that will soon mean the Click to Enroll model, and OCW will become a sustainable fixture at all universities.