Top dogs may keep online territory to themselves

September 20, 2012

While elite universities in the US and Europe may benefit financially from the emergence of online courses, smaller institutions and for-profit education companies could find themselves squeezed out, a report has claimed.

According to Shifting Ground: Technology Begins to Alter Centuries-Old Business Model for Universities, produced by credit rating agency Moody's, the recent rush by leading universities to create collaborative networks offering massive open online courses (MOOCs) is a pivotal moment for the sector. Such networks include Coursera (co-founded by two Stanford University professors and now with several institutions on board) and edX, a collaboration between Harvard University and the Massachusetts Institute of Technology.

Moody's predicts "positive credit effects" for elite universities, which could use MOOCs to reach students worldwide. "The entry of elite universities [into the online domain]...will help legitimize this form of delivery and reduce the stigma that has historically been associated with distance education," the report says.

"Over the long term, these leading universities could easily garner material new revenue if they were to monetize these products."

However, the report warns of negative effects for smaller colleges that are "left out" of emerging high-reputation online networks.

Institutions that are unable to join such networks, or fail to carve out an independent niche, are "likely to experience credit stress" driven by declining student demand, the report says. "Over the long term, they will lose market share to universities with a stronger brand and a national draw," it concludes.

For-profit universities could also lose money as they increasingly face competition from easy-to-access online courses, the report adds.

It also points to areas where MOOCs could provide income for universities, including via improved operating efficiencies because of the lower cost of course delivery and revenue from online advertising.

It adds that the use of proctored exams to verify a student's identity and reduce cheating paves the way for fee-based certificates or course credits.

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