What the faltering OPM market means for colleges

C.olleges are increasingly turning to for-profit companies to develop and manage their online programs. The market value of online program management, or OPM, is now estimated at over $ 4 billion.

With that growth came greater scrutiny, not just by higher education observers, but also by the federal government. In January, Senator Elizabeth Warren and Senator Sherrod Brown wrote an open letter, following one sent in 2020, to several ed-tech companies. The letters sought more information on how businesses operate, particularly highlighting allegations of overly aggressive student recruitment practices and their role in the student debt crisis. In May, the Government Accountability Office released a report highlighting the lack of available information on the provisions and recommending how the Education Department should better monitor them.

While the threat of new regulations will certainly affect the future of the OPM market, the current financial framework of the companies themselves could give us more insight into where the industry is heading. Consider what has happened to some of the biggest players since the start of the year:

  • Grand Canyon Education said in a recent quarterly earnings report that while service revenues increased year over year, enrollments in partner colleges fell 4.5%.
  • Pearson reported in a quarterly update that while its OPM business was growing, it will lose its largest client, Arizona State University next year. (The ASU, by many estimates, accounts for about a third, or $ 110 million, of Pearson’s OPM revenue.)
  • Wiley said in her annual report that her OPM business has seen revenue declines year over year, based on an 8% drop in online signups.
  • Coursera said in its second quarter report that it missed its revenue estimates. It also lowered its estimates for revenue growth, with its OPM business losing 4% of revenue year-over-year.
  • Zovio’s finances have dwindled to the point that it was better for the company to sell its OPM assets to the University of Arizona Global Campus for just $ 1, in a deal where Zovio will also send UAGC more than $ 14 million in payments in cash.
  • 2U said in its second quarter report that its OPM revenue fell 2% year-on-year and lowered full-year 2022 estimates for overall revenue by 10%. Total graduation enrollments also fell, both from fewer students and fewer credit hours attempted per student. The company, which acquired edX last year, laid off about 20% of its staff this summer as part of its strategy to focus on profitability.
  • FutureLearn – the company created by the Open University and acting as a MOOC and OPM focused on Europe – is in dire financial straits and may not survive next year without a new source of infusion of money.

It turns out that the OPM business is difficult. And colleges with online programs, whether or not they use OPMs, can draw a handful of important lessons from recent developments.

Overly optimistic growth plans are a mistake. While online signups have increased over the past couple of years, new dynamics are at play that are not fully understood. The combination of the decline in overall enrollments and the proliferation of online programs (there are more than 350 MBA programs online alone) means that many online programs are having real problems achieving their growth goals. Online programs should instead focus on how to be sustainable at current levels, or even with reductions. It’s time to move beyond the “keep investing for growth, we’ll find profitability later” mentality.

Long-term contracts may not be feasible. What happens to an online program if the OPM company that helps manage the program with complicated contract terms is purchased or starts operating at a reduced level? It is no longer a theoretical question. Colleges need to become much more sophisticated when contracting, devising real emergency plans and conditions that can end partnerships without hurting underlying academic programs.

Greater public scrutiny of degree programs is having an effect. Online masters programs have been the sweet spot for the OPM market. Graduate programs play a huge role in getting students into debt, and colleges that use them as cash cows (by charging excessive fees) risk damaging their reputation. Public pressure is not going away, so colleges would do well to withdraw this strategy before regulations dictate the issue.

Flexible credentials are a good strategy. Several ed-tech companies have compensation business lines that make the decline in degree programs more tolerable. Non-degree programs that have shorter terms and can accommodate the busy life of working professionals are growing for a reason. Students require more flexible credentials that can help them in their careers without requiring multiple years of study before any earnings. Ed-tech companies employ many strategies that colleges should avoid, but flexible credentials are an exception.

Traditional institutions, on the whole, have not welcomed the sudden foray of for-profit companies into the higher education landscape, but there is a clear benefit to colleges: the requirement that publicly traded companies disclose quarterly. its business results. We are in a time of greater uncertainty, particularly with regards to enrollment and tuition revenue, and the institutions that take advantage of this valuable information from the OPM market will be in a much better position to emerge.


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