open content

Johansen Dissertation on Sustainability of OCW Available

Newly minted Dr. Justin Johansen’s dissertation study, The Impact Of Opencourseware On Paid Enrollment In Distance Learning Courses, is now available from BYU’s Electronic Theses and Dissertations (ETD) archive.

This dissertation is the first piece of empirical work I am aware of that demonstrates clearly that a distance learning program can simultaneously (1) provide a significant public good by publishing opencourseware and (2) be revenue positive while doing it. In other words, Justin’s study not only demonstrates that it is possible to publish opencourseware without requesting donations from users or foundations, it goes further and demonstrates that it is possible to make money publishing opencourseware. And if you can make money publishing opencourseware, you can continue publishing opencourseware for a very long time. This capacity is also known as sustainability.

Congratulations to Dr. Johansen!

P.S. John Hilton will be defending his dissertation, which applies a similar methodology to examine the impact of giving away free e-books on the sales of printed books, February 11!

open content

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, 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.

open content

MIT OCW Funding Analysis (and Implications)

In an opinion piece for The Tech titled OpenCourseWare and the Future of Education, Ryan Normandin lays out MIT OCW’s funding breakdown. It’s the first time I’ve seen the numbers shared publicly. He begins by stating that MIT OCW’s budget is $4.1 million per year (though he notes that OCW cut $500,000 in costs for 2009), and then analyzes revenue by source:

Since its creation, 22 percent of OCW’s expenditures have been covered by the Institute, 72 percent has been paid for through grants from the William and Flora Hewlett Foundation and the Andrew Mellon Foundation, and 6 percent has been covered by donations, revenue, and other sources.

(His article states that these numbers are “since it’s creation,” but they’re the best breakdown of numbers I know of. If you know of a similar breakdown for MIT OCW’s 2009 finances, please drop a link in the comments below.)

If we work these numbers out, each year that’s roughly:

– $2,952,000 for 72% covered by Hewlett and Mellon,
– $902,000 for 22% covered by MIT internally, and
– $246,000 for 6% covered by donations, corporate sponsors, affiliate revenue, and all other sources of revenue.

Ryan’s article is an extended argument for why MIT should continue to support OCW after its grant funding runs out in two years. I (and I expect most readers of this blog) agree with the importance he places on the project and the very important public good it has become. More importantly, MIT OCW is terribly important to the broader field of open education.

Because MIT OCW receives such a large percentage of the OCW world’s traffic and media attention, potential problems for MIT OCW are potential problems for all of us.

I keep asking myself how you support a project when 3/4 of its funding is pulled out from under it. Two years is not that far away. And it already feels like I’m getting a “Please remember to donate to MIT OCW” email once a month. On 25% annual budget, what would MIT OCW do? If MIT OCW were to go into stasis (like USU OCW recently did), how would that be viewed by the world?

More importantly, what is Plan B for the broader OER field? Imagine that two years from now MIT OCW announces drastic cutbacks (or temporary suspension) of its program. How do the rest of us argue for open sharing on our campuses then? Perhaps these arguments would revolve around the sharing model, or the way sharing happens – “we’ll do it differently in the following way…” Perhaps they would revolve around business models and using OCW to generate revenue (e.g., by using them to market for-credit online courses). How else do we make the argument for open sharing on our campuses in a post-MIT OCW world?

I’ve already heard “just because MIT can do it doesn’t mean we can” about a thousand times from faculty and administrators. What if that becomes “Not even MIT can do it for longer than a few years…”