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In 2002, the Massachusetts Institute of Technology (MIT) launched the Open Courseware project by making the content for a number of its courses available online to the public. The project prompted other universities to follow suit, including Stanford, University of California and Harvard. The term Massive Open Online Courses or MOOC was coined in 2008 as the number of students accessing these courses began to grow. The most popular of these MOOC’s have attracted up to 100,000 students from around the world signing on to the course. Around the same time, companies began to form around the concept of hosting MOOC content and students. Some of those companies include Coursera, started by two faculty members from Stanford, EdX which was started by MIT and Udacity, another Stanford associated initiative. Although the companies are claiming not to be interested in profit, each have had large infusions of venture capital over the past couple of years, clearly indicating that there a strong interest in finding ways to monetize the phenomenon. The big question for traditional colleges and universities is what impact the MOOC movement will have on their current model for generating tuition revenue. In addition, some colleges and universities may be able to use the MOOC movement as a way to generate new sources of revenue for their institution. The answers to these questions depend in large part upon the prestige of the institution, as well as the quality of the course content that they are able to produce. One possible model for revenue generation is for universities to create and license course content. For example, the University of Pennsylvania is licensing one of its poetry courses to Coursera. Although the amount of the licensing fee is not being disclosed, the University of Pennsylvania estimates that it cost approximately $50,000 to create the content for the course. Coursera is proposing student fees to take the course that would range from $20 to $50 in order to actively participate in the course and receive a certificate of completion. Although enrollments for the most popular courses can hit 100,000 students, retention rates are as low as 3 percent. This type of scenario has the capability of generating anywhere from $60,000 to $150,000 in revenue, however, how much the university will receive after Coursera pays for the expenses of faculty and assistants to run the course and course discussions, provide bandwidth, and administer student accounts and the awarding of completion certificates is uncertain. For the sake of evaluating this model, if the University of Pennsylvania were to receive a modest 10 percent commission on the revenue generated, it would take four to nine ‘semesters’ of the course being offered before they would break even on their initial investment. Another model might be to use the MOOCs as substitutes for courses offered at the university. Courseera charges the institution fees in order to set up a website for its students and facilitate access to content and discussion forums. In addition, there are fees for administrators to access to student grades. As of now, the fees for offering a university-branded MOOC have not been established; however, the university will have to take into account a number of factors when deciding if this makes sense. For example, if the MOOC eliminates an adjunct faculty member who would normally taught the course, how does the elimination of this expense compared to the cost of licensing the MOOC affect the bottom line in terms of tuition revenue? A third possibility for traditional colleges and universities to consider is the acceptance of MOOC credits for transfer. Some might argue that this presents a potential drain on tuition revenue and dismiss the possibility of considering these courses as transfer credit. However, many students already take online courses or summer courses at community colleges in order to accommodate their personal schedules, so it is possible that the switch to accepting MOOCs for credit will not have a discernible impact on tuition revenue. One other possibility that some institutions are considering is offering the first several courses in its program as free MOOCs. In theory, a student would be attracted by the idea of the free courses and then subsequently pay regular tuition in order to complete the remaining courses in the program. So the institution would sacrifice tuition revenue for several courses in order to generate tuition revenue for the remaining courses in the program. A college or university would have to calculate the contribution margin per student, existing capacity to accept more students and decide if the additional students, even with fewer courses, still has a positive effect on the bottom line. Regardless of the model that colleges and universities decide to pursue, it appears that the concept of Massive Open Online Courses is here for the foreseeable future. How this will impact tuition revenue generation at traditional institutions of higher learning remains to be seen.
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