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Online Program Management: An updated view of the market landscape for 2019

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Yesterday I had the opportunity to share an updated view of the Online Program Management (OPM) market in a webinar with WCET. There were too many questions to fully address during the session, and we are planning a joint blog post to address additional questions over the next week.

You can view the recorded webinar at https://youtu.be/uMSa3lEn_4I or at the embed below the graphic.

We have a session planned for the annual WCET conference in Denver in early November. We’d love to see you there and continue the conversation in person.

Updates since 2018

As part of the webinar I released an updated graphic of the OPM landscape, taking a broader view of this growing but dynamic market. Since the last version shared a year ago, I added a new sub-category of vendors, for-profit conversions, to capture the Kaplan (Purdue Global) and Grand Canyon Education (GCU) with its recent Orbis acquisition. I expect this group to grow, as Bridgepoint Education (Walden U) is seeking approval to make similar changes.

Some other enhancements to note:

  • The business model axis makes it more clear that there is a range of options between Tuition Revenue Share and Fee for Service.
  • 2U now shows its acquisitions of GetSmarter and Trilogy, while also add its investment and partnership with Keypath. I also am showing the entry into the bachelors degree market the London School of Economics and the more recent Institutional Suite.
  • Wiley shows its acquisition of Learning House.
  • I have adjusted the sampling of fee-for-service vendors based on market activity.

Fall 2019 Graphic

As before, please note that this view is intended to give a visual overview of the market landscape and is not comprehensive in terms of vendors represented. This is particularly true as you approach the bottom of the graphic.

Market landscape of OPM vendors, showing business model from revenue sharing to fee-for-service on vertical, and credential from degrees to certificates on horizontal.

The webinar covers additional context around this graphic.

(Source for video: https://youtu.be/uMSa3lEn_4I)

Expect more coverage soon on the OPM market and the broader world of online and hybrid education.

Update 9/28: Mentioned that 2U’s entry into bachelors degree market started with London School of Economics, which pre-dated the Institutional Suite announcement.

The Century Foundation on Online Education and OPMs: Position paper masquerading as a study

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The Century Foundation (TCF), a public policy advocacy organization, released a new ‘study’ today about online education and the usage of for-profit service providers such as Online Program Management (OPM) companies. “Dear Colleges: Take Control of Your Online Courses” follows up from the 2017 report loosely based on public records requests for contracts from public colleges and universities. Its intent is clear from the title, as it is hardly a study but more of a position paper against the OPM market in general and tuition revenue-sharing agreements in particular.

As public and nonprofit colleges have sought to expand their online course offerings, a major industry has developed to help them with that task. These private, for-profit developers—including divisions of big publishers, like Wiley and Pearson, and firms like 2U, Academic Partnerships, and Bisk—are known as online program managers (OPMs). They operate on a contract basis, and on terms that endow them with enormous, and, at times, comprehensive control over the services offered in the contracting college’s name. There are downsides to handing over responsibilities to external, for-profit operators—downsides that make the convenience schools receive in return seem a bad bargain indeed.

The Positives

It is valuable that TCF did the legwork to obtain and share 79 new contracts between providers and public institutions, and you can follow links in the report to see a broad range of contracts. OPM, Online Program Enablement (OPE), 1OPM is for bundled service providers including marketing and enrollment services, course and curriculum design, student support, and tech / data infrastructure. OPE is a broader category of enablers that may do a subset of those jobs, often unbundled, but are still directly helping a school develop an online program.LMS, courseware, MOOCs, Continuing Education or Professional Development, and general EdTech – they have them all.

It is also valuable to see TCF’s positions laid out in five warnings to colleges and universities.

1. Don’t Buy Bundled Services

2. Don’t Bypass Your Own Faculty

3. Don’t Sign Lengthy, Unbreakable Contracts

4. Don’t “Share” Your Tuition Revenue

5. Don’t Facilitate Aggressive Recruiting

While items 1, 3, and 4 really just reword the title argument against the revenue-sharing OPM model, items 2 and 5 are worth reading. From item 5:

On average, the universities from whom we’ve acquired contracts share half of their tuition dollars with the partnering OPM, and when that OPM is a for-profit company, as most are, and is also tasked with recruiting, it is incentivized to get as many enrollments as possible. This scenario leads to the same predatory and aggressive recruiting tactics long used by for-profit colleges, but this time under the very different guise of a nonprofit or public university.25

The Negatives

It’s well and good for an advocacy organization to take a position, but for TCF to describe this report as a study is disingenuous. I’m fairly confident that the main points were written ahead of time and are consistent with plenty of TCF advocacy efforts. The data analysis is just there to backup their main arguments and to lend weight to the report and make it feel like an actual study. TCF’s Bob Shireman helped draft the California bills I described a few days ago, where one goal of the bills were to cripple revenue-sharing agreements. He has been a frequent critic of bundled OPM services, long-term contracts, and revenue-sharing. We get it. 2To be clear, I have no problem with his work in this area. I do have a problem when his advocacy leads to harm for the very students the bills are meant to protect and when TCF presents its positions as a study.

If you look at the contracts in the new batch of records released by the report, they are all over the map as described above and often are not directly related to online programs. The LMS category may be a necessary part of the infrastructure for online programs, but at most schools the larger mission is to support traditional face-to-face offerings. The same is true with courseware offerings. And several of the Continuing Education contracts listed have strong face-to-face components. It would have been far better to keep this report focused on the subject – OPMs, OPEs, and perhaps MOOCs and CE / PD companies. Those are the ones that could be argued are relevant to controlling a school’s online courses.

Furthermore, there is a misunderstanding of traditional per-student fixed fees that have long been used by courseware companies, many EdTech companies, and LMS companies (although they tend to use enrollment bands). Tuition revenue-sharing is different, basing itself directly on the revenue brought in by the school with a percentage basis going to the provider.

The TCF report has Blackboard’s contract with Eastern Kentucky University listed as revenue-sharing, but the contract is a standard LMS model. Fixed fees per year based on estimated enrollment bands. The TCF also has courseware contracts with Cengage, MindEdge, Red Shelf, and The College Network listed as revenue-sharing when they are standard courseware versions – fixed fees per student. Two OPE contracts – Smart Sparrow and 352 – are likewise fixed fee per student and not true revenue-sharing. I suspect there are even more cases of false revenue-sharing positives, but I have only have had time for spot checking on this point.

To their credit, the report attempts to focus on those product categories tied to online offerings.

As of August 2019, we received seventy-nine contracts, and of these, forty-one are directly relevant to the management of online courses. These forty-one do not include contracts that only address access to software like learning management systems. Of the relevant contracts, over half (53 percent) entitle the provider to a share of the school’s tuition.

There are two problems here.

  • One is that TCF does not list in their summary spreadsheet which contracts they consider “directly relevant to the management of online courses”. By my hand-coding, I get 14 OPMs, 10 OPEs, 2 MOOCs (and these are not the more-recent MOOC-as-OPM version), and 17 CE / PD, for a total of 43. I’m guessing that my list is fairly close, but who knows.
  • More importantly, these data points are mostly arbitrary, depending on which schools they asked and how successful they were in obtaining public records. Yes, they claim to have targeted schools with large online enrollments, but the data are mixed up between face-to-face and online programs, degree-based and non-degree based programs and courses, and contract years from 2002 to 2019. As a public listing this approach is fine. But to make constant percentage-based claims (53% of contracts, 68% of contracts, etc) implies statistical relevance and is misleading.

There is also a misreading of other reporting, particularly with the story of USC and its School of Social Work. The TCF report states:

Since USC had given over so much control to 2U, it had little control over how the program recruited, or who it enrolled: as revealed by the Los Angeles Times earlier this year, the online social work program admitted students that it was not prepared to provide with a quality education, charging them more than $100,000 for their degree in the process. All the while, USC reportedly lost money on the program, because so much of the tuition went to 2U.

This story is problematic for USC, but the argument made by TCF that the loss of money was “because so much of the tuition went to 2U” is not supported by the source LA Times article.

The university, which has contracted with the company through 2030, said the factors that led to the school’s budget crunch were “much broader” than its relationship with 2U.

“Generally, this partner relationship has been positive,” the university said in a statement. [snip]

There is much to the USC story that deserves further scrutiny, but this claim by TCF is inaccurate or at least unsupported.

Online education and OPM relationships should have greater accountability and transparency, and it is good that TCF has done the legwork to bring contracts into the public view. But it is a mistake to treat this report as anything other than a position paper from an advocacy organization, and a rather poor one at that.

Postscript on 2U Earnings Call Story

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My live-tweeting and blog post two days ago about 2U’s earnings call seems to triggered a bit of news coverage and commentary. I stand by that post, but I have noticed one area that may have been (inadvertently or not) mischaracterized. The following description was too brief and could use some clarification:

2U announced a new “institutional suite” product based on their recent RFP win with UNC for a university-wide support (exclusive provider) for 10 graduate programs. This institutional suite is not the same thing as their traditional full-service revenue-sharing OPM model, however. Importantly, it includes fee-for-service offerings.

My understanding is that the new institutional suite, and more importantly the fee-for-service model, is additive and not a replacement. In other words, 2U is expanding their offerings so that traditional OPM clients (i.e. schools already signed up with revenue sharing programs) can extend 2U services into other programs where fee-for-service is the model. I do not believe that 2U is moving away from revenue sharing.

Now that I re-read the post (which I have updated), the second reference is likely a source of some of this confusion.

2U is not the same company as they were even two years ago. They now offer fee-for-service as well as revenue-sharing models (as do most of the other large OPMs) [Note: These fee-for-service offerings are in addition to traditional revenue sharing models for 2U], and their growth assumptions appear to be as much around bootcamps and short courses and they are around traditional graduate degree programs.

What is important to understand is that the issues mentioned in the earnings call as drivers of the changes (market dynamics and increased competition) are more about online education as a market itself, not specifically about other OPM vendors. It is online programs that are having much greater competition from other institutions – a competition for students – with one result being smaller cohort sizes in many cases.

2U appears to be reacting to these changes in the overall market and the resultant changes in business outlook, by broadening their portfolio. One 2U method – that we have seen starting in 2017 – is the addition of short courses and boot camps by corporate acquisition (GetSmarter and Trilogy). Another method – that we first heard about two days ago – is the addition of more services for partner schools outside of the initial program. The latter is the genesis for the institutional suite.

The changes 2U is going through, in their offerings and outlook and even stock price, are significant by themselves. But I do not think they are moving away from revenue sharing.

July 30, 2019: The day the OPM market changed

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Well that was quite an earnings call. 2U ($TWOU) shared their second quarter 2019 results and answered investment analyst questions this afternoon, and the implications of the call go well beyond 2U’s stock (down 25% in after hours trading by end of call). 2U is changing their entire outlook for graduate programs (i.e. their traditional Online Program Management, or OPM, model) as well as their short-course model (i.e. non-degree coursework based on the company’s GetSmarter acquisition).

Click here to read full thread on Twitter

Feel free to head over to Twitter for the full thread and discussions, but I’ll recap the main points below and add why I think this is an inflection point for the OPM market.

  • While 2U executives described material changes in their top online programs (e.g. USC social work, UNC MBA) last quarter, this time they are changing their overall guidance and not just planning to “operate their way out of the problem”. Today’s call was 2U recognizing that the markets around online education have changed in fundamental ways.
  • The primary change 2U sees is for online education overall and not just for OPM-based programs – there are many more online offerings available in just the past few years, leading to a much more competitive, regional market. Students more and more are looking for online programs from schools near them. One effect is that it is much harder to scale programs to several hundred students.
  • As a result, 2U is changing their outlook, cutting down expected new graduate program starts by at least half over the next year or two, and cutting back on marketing spend per program as the last 50 students to recruit are the toughest ones (paraphrase). And they are cutting expectations for enrollment per cohort across their portfolio.
  • 2U mentioned many times during the call that it is their scale and suite of offerings that will be their competitive advantage. In addition, 2U executives believe they are seeing these structural changes first due to scale, but other OPM providers will see them soon, and the smaller ones are already having problems.
  • The recent Department of Education guidance around financial aid for California students in out-of-state programs from nonprofit providers (including many of 2U’s clients) is also having an impact on guidance. 2U expects the issue to be resolved soon, but they needed to account for the uncertainty in today’s earnings and projections.
  • 2U announced a new “institutional suite” product based on their recent RFP win with UNC for a university-wide support (exclusive provider) for 10 graduate programs. This institutional suite is not the same thing as their traditional full-service revenue-sharing OPM model, however. Importantly, it includes fee-for-service offerings.
  • 2U is seeing similar-in-scope changes to their short courses segment that is based on the company’s acquisition of GetSmarter.
  • As a company, 2U is redefining itself by its scale and suite of offerings – traditional OPM for grad programs, short course / non-degree offerings from GetSmarter, bootcamps based on the company’s acquisition of Trilogy, and the new institutional suite with fee-for-service models.

Why This is Important

While MindWires has investment companies as clients with our consulting and market analysis, we do not provide investment analysis. I tend to write about stock market issues only as it directly affects company offerings for education. And yes, this news is worth following in that regard – we’ll have to see how analysts cover the earnings call news and how it impacts 2U’s operations. Put another way, I don’t know the impact on 2U the company, but it is worth watching.

More broadly, I think the impact will be much broader in nature. Last year I wrote about the OPM market and how it is chaotic and dangerous, despite overall market growth.

The picture one gets is of a chaotic market that is not for the faint of heart, and one that will likely see further consolidations and category changes. 2U, for its part, has been successful partially due to a niche strategy where they go after elite master’s programs and mostly avoid direct competition or engagement with the rest of the market. And recently we have started to see the MOOC providers become OPM providers – where the primary revenue for Coursera and FutureLearn are based on revenue sharing with online programs, albeit with lower sharing rates and with very different marketing approaches. In other words, there seems to be several efforts to enter into the same OPM race, but if possible to avoid being in the mainline rev-share OPM market. The Toecutter would feel right at home.

OPM market as Mad Max scene, with OPM providers chasing the collegiate online program revenue, often at their own peril.

Over the past year 2U is no longer staying on the outside of this chaos – they are caught up in the dynamics, and today’s call acknowledged the messy, changing market while changing the company plans. Beyond 2U the company, I agree that other OPM companies will be affected by the same market forces. The market is getting even messier.

In short, I agree with the 2U description that online education markets are changing and should lead institutions and support companies to adjust or revamp their plans accordingly.

Higher education often has a herd mentality, and online education is one of the most active herds. It seems that every time you talk to an institution considering a new or revised online strategy, there is some positioning against 2U programs. Either they want to emulate USC and UNC and Syracuse, or they want to deliberately take a different path. 2U as an idea has great currency, but those assumptions about what the idea is are changing. 2U is not the same company as they were even two years ago. They now offer fee-for-service as well as revenue-sharing models (as do most of the other large OPMs) [Note: These fee-for-service offerings are in addition to traditional revenue sharing models for 2U], and their growth assumptions appear to be as much around bootcamps and short courses and they are around traditional graduate degree programs.

It is worth mentioning what 2U did not describe during the call (if they did, I missed it) – the effect of campaigns pushing back against revenue-sharing models and OPMs in general. I suspect that when we pull back the covers on the UNC-based institutional suite offerings we will see these effects indirectly, but they did not directly mention this situation directly.

There is a lot going on in the world of online education for higher education, with the California ruling and 2U revised plans coming out in just the past eight days. There are big implications to consider, and we’ll cover the ongoing changes as we learn more, but mark today’s date as a major change in the OPM market.

Note: I wrote this post fairly soon after the call. If I misread anything in my analysis, I’ll update this post accordingly.

Update 8/1: Added note clarifying fee-for-service as additive model.

Postscript on College Scorecard, OPMs, and Simmons University

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In last week’s post I shared a view of Simmons University’s master’s programs, showing two-year cohort size for July 2015 – June 2017 as well as median student debt levels, with the new program-level data available in the College Scorecard. I do not think we have enough information or analysis to extrapolate and make broad conclusions, but I do think we have new data that is worth exploring.

Before moving onto other topics in the blog, I would like to share some additional data visualizations that address some of the commentary on the Simmons post. None of which proves particular conclusions, but all of which can be illuminating and worth considering. As a reminder, here is the graphic in question:

Simmons University Grad Programs by # Students and Median Student Debt Levels and Online Offerings

Below I paraphrase two of the points made on Twitter or in blog comments and then share additional data to address those points. For now I am using 2U OPM 1Disclosure: 2U is a past client of MindWires and a subscriber to our LMS Market Analysis service. data for three reasons: 1) the company is the OPM partner for Simmons and the original post, 2) they have a market niche for elite programs with higher tuitions and higher potential student debt levels, and 3) the company is the most transparent vendor in sharing their data.

Update: The student count is the number of borrowers in the cohort, not the total number of students. Students who were enrolled during that cohort period but took out no Title IV-based student loans would not be included. For example, Simmons’ master’s of social work has a Count (shown below) of 440 but an IPEDS-derived cohort enrollment of 534, and master’s of nursing has a Count of 532 but an IPEDS-derived cohort enrollment of 684. The Median and Mean data goes across the borrower count.

Do OPM-enabled programs lead to higher student debt than others?

This is probably easier to look at within a specific discipline and within a specific non-Simmons school. When looking at Social Work programs, it is not obvious from initial views of the data that the OPM-based nursing programs have higher student debt than others.

Student counts and debt levels for master's of social work

Let’s look at another school that uses 2U as an OPM partner, such as their largest client the University of Southern California. Again, it is not obvious from initial views of the data that the OPM-based nursing programs have higher student debt than others.

USC Grad Programs

I think this question is worth further study, but Jeff Selingo made a good point about the more-general nature of these high debt levels.

Do Nursing and Social Work Programs Lead to Higher Debt Levels in General?

By ranking the master’s level programs across the full data set of roughly 230 disciplines, we get a better general sense of the average debt levels for social work and nursing programs (median by school averaged across all schools with data available for this discipline). Both disciplines appear to be middle of the pack in terms of student debt levels.

View of Programs of Study

Social Work is ranked 122 out of 230 with median student debt of $39,622, and Registered Nursing is ranked 73 and $46,859.

Be Careful with Extrapolation

Sorry to pull a Mueller on you (if there had been enough analysis to say there is no correlation I would have said so), but there are not further conclusions to be made yet beyond a specific university or a specific program. I think the data will support further analysis and are valuable additions to the College Scorecard, but it’s safer now just to make observations and pose questions that can be studied in more detail over time. I also look forward to reading further analysis from other people exploring the new data.

Disclosure: 2U is a past client of MindWires and a subscriber to our LMS Market Analysis service.

Update 6/10: See in-line notes clarifying how the College Scorecard defines Count.

Insights into Online Education and OPMs from the College Scorecard

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Most public discussion around program-level College Scorecard data for student debt levels has focused on transparency in terms of helping students decide which schools to consider, but I think a more important potential benefit is for policy makers, institutions, EdTech vendors, and even investors. Better analyzed data should inform people and organizations making decisions on creating, funding, and supporting academic programs. A case in point is the insight that you can get by looking at a school that offers online programs, whether using an Online Program Management (OPM) partner or not.

Simmons University is a small private school in Boston, with women-focused undergraduate programs (fewer than 1,800 students) and co-educational graduate programs (similar numbers). Despite its small size, the school has two of 2U’s largest programs (Nursing and Social Work). Simmons has other programs signed up with 2U that were not active as of the beginning of July 2015.

Interestingly, Simmons also has an online Library Science program that does not use 2U or any other full-service OPM partner.

I combined the College Scorecard data with IPEDS and manual augmentations from public 2U and Simmons University websites to get a deeper look. Some notes first to better understand the data:

  • This Department of Education data set is preliminary and has not been reviewed by colleges and universities. The ED plans to release a final version in Fall 2019.
  • The data has been combined into two-year cohort groupings with the data below from July 2015 through June 2017.
  • I have listed below whether Simmons offered fully-online options for each program as of the 2015-17 cohort, but there are also on-campus versions of the same programs, and student counts and debt levels are aggregated.
  • The number of students is taken from the two-year cohort award grouping and not from the IPEDS student counts.
  • Update: The student count is the number of borrowers in the cohort, not the total number of students. Students who were enrolled during that cohort period but took out no Title IV-based student loans would not be included. For example, Simmons’ master’s of social work has a Count (shown below) of 440 but an IPEDS-derived cohort enrollment of 534, and master’s of nursing has a Count of 532 but an IPEDS-derived cohort enrollment of 684. The Median and Mean data goes across the borrower count.
  • Some programs do not show student debt levels due to this information being suppressed by the College Scorecard for privacy reasons (e.g. too few students would allow indirect determination of student identities).

One of the reasons that I chose Simmons University and 2U 1Disclosure: 2U is a past client of MindWires and is a sponsoring participant of Michael’s Empirical Educator Project. as an example is that both organizations are remarkably transparent with their data. 2U is not the only publicly-held OPM company, but they are the main one where OPM is their primary business (unlike Pearson or Wiley), but even so, they provide more information than any other company. To keep this as an exploration of public data, I have not contacted either Simmons or 2U for commentary.

Simmons University Grad Programs by # Students and Median Student Debt Levels and Online Offerings

Some notes from my initial exploration of this data:

  • Tuition for the graduate programs ranges from $980 to $1,450 per credit hour with ~40 – 60 credit hours required for a degree.  This leads to total tuition in the $50k – $70k range. But look at the median student debt levels, most of which are in the same rough range as total program tuition. Does nobody use their own money for graduate school? (Update: see note above about the Count data being for borrowers only. In Simmons’ case, roughly four in five students were borrowers.) Education seems to be the only academic discipline with student debt significantly below program tuition.
  • This data makes it more clear why a school might offer online programs. The three largest graduate programs, by far, have online offerings, and I would assume that the vast majority of students are online in these programs. For Simmons going online means the opportunity to move from dozens of students to hundreds of students per program. I realize this should not be the only, or even primary, reason for a school to offer graduate programs, but the data make this factor quite evident.
  • The two largest programs offered online are in partnership with 2U, and according to investor analysis, both Simmons and 2U make $10 – $20 million in tuition revenue per year.
  • The third largest program offered online, library science, is the only one at Simmons not using 2U or any OPM, at least that I can figure out. This makes an interesting case that I’d like to better understand. Why does this program appear to be managed internally and how did it get up to hundreds of students per cohort?
  • At the same time, the two large 2U programs have the highest student debt levels. Is this a feature of the disciplines involved (social work and nursing), the usage of an OPM, both, or some other reason? The debt levels are roughly 15 – 16% higher than the third placed program (in terms of median debt levels).

It  might be interesting to compare data across multiple OPMs or across different disciplines to get further insights. For now, this case study seems to provide a lot of insight into online education and OPMs and general student debt levels for graduate programs.

Update 6/10: See in-line notes clarifying how the College Scorecard defines Count. Also added emphasis that online and f2f programs are aggregated.