In multiple podcast interviews, interviews with GAO researchers and investors, blog posts, and keynotes, I have pushed back on the popular but flawed narrative that the Online Program Management (OPM) market is moving away from tuition revenue sharing to fee-for-service as the predominant business model. What I have argued instead is that:
- Market options are expanding, not simply moving from one model to a another;
- Revenue share is not going away (without a change in regulations), and when given a choice schools tend to favor this model for OPM contracts; but
- Market forces are pushing down the revenue share percentages and contract lenghts.
Today we get another example to back up this argument, this time from Wiley University Services, essentially Wiley’s OPM division. As regular readers probably know, I’ve been impressed with the reporting quality from Wiley, as their survey reports accurately describe methods and share full results. The new Transparency Report has its flaws, particularly that it reads like a calmly worded marketing description of their services and client base rather than as an objective description of outcomes for clients and their students. But the report has some interesting data on revenue models, namely that customers (colleges and universities) choose revenue share models 74% of the time, fee-for-service just 15% of the time, and a hybrid model combining revenue share and fee-for-service the remaining 11%.
Furthermore, Wiley describes how their revenue sharing percentages have dropped to 30 – 40%, and their contract lengths have dropped to 5 – 7 years.
Wiley is not alone with these changes. One of 2U’s big changes this summer was the introduction of stackable options of revenue sharing. The base package is no longer a full bundle at 60+% revenue sharing, rather it starts at 35% with options to increase to a full 60%.
Noodle, which is known for its fee-for-service offerings, also offers a form of revenue sharing at 15 – 35%.
Pearson is taking a different approach to these market forces, especially after the announced loss of its largest OPM client, trying to figure out if the overall market with reduced enrollments and price and contract pressures makes sense for them, or whether they should sell their OPM business. Note the framing of this strategic review as whether this higher education focused business of OPM aligns with their priority of workforce skilling support.
We’re also launching a strategic review of our OPM business as we evaluate its ability to integrate with the rest of the group and our broader workforce skills strategy.
And just as I’m finishing this post, I see the news that 2U / edX has a new collaboration with Emeritus to go after the lower-cost markets of India, Latin America, and Asia Pacific. While that news deserves a separate post and some research, I will note that it further shows how market forces are pushing down OPM costs.
I’ll repeat it again: OPM revenue sharing does not appear to be going away, at least without regulatory changes, but market forces are changing the terms with lower share percentages and reduced contract lengths. Not in every case, but as a general market trend.