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The Economist on OPMs

Thanks to my good friend S.L. Narayanan in Chennai for sending me a thought-provoking article in the Economist. It looks at the market for OPMs—the Online Program Managers who work with academic institutions to help them get online.

Full disclosure: I've worked with one of the biggest, brought in by major US universities to produce fee-based online courses. For those that don't know, it's an interesting business model: the OPM doesn't just produce the course (videos, instructional design, platform back-end etc.) but funds the production. They also handle marketing of the course, and the transactional elements (matriculating students, managing enrollments etc.)

In return, the OPM takes a hefty percentage of the revenues: often over 60%. (That's hefty!) The business model has worked because it has been, in effect, easy money for the universities. They still get 40% of revenues from courses that cost the student tens of thousands of dollars. And without the OPM, they wouldn't know how to harvest that revenue source. So it's a win-win.

But. As the Economist puts it: 

“Over time universities will surely try to take a larger slice of revenues themselves. It doesn’t take a master’s degree to work out what these developments will do to the OPMs’ margins.”

This has been said (not least by me) for a while: that the OPM's had a very narrow window which was likely to close soon. But it hasn't yet: the major OPM companies such as 2U continue to fly high ("fly high" in terms of share price, that is: 2U is not profitable...and veterans of the bubble of 2000 will take note!)

So the question is, can universities (and other learning institutions) do more on their own? 

I would say emphatically "YES." Production costs continue to fall (as we all know, perfectly acceptable video can be shot on an iPhone) and what's more it's arguable that students respond better to more 'informal' type videos. In other words, they can relate to an instructor in a iPhone (or even web-cam) video more than to a slickly produced, TV-quality lecture. 

The student recruitment (marketing) side of the OPM's business is perhaps something that universities would still want to outsource, but even this must surely come in-house sooner or later? A very interesting sector to watch. And even more exciting to be a part of!


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