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The business of MOOCs: how to profit from giving away something for nothing

If you talk about Massive Open Online Courses or MOOCs to academics, or even if you read articles written around the subject, one question, actually a statement and a question, will inevitably come up: “Yes, but you can’t make any money from MOOCs so where is the business model?”. This is sometimes paraphrased as “Why would we give away what we do for free? Where is the business model?”. The first relates to the likely longevity of companies like Coursera and Udacity. The second to the question of the participation of universities in producing content. These issues are often conflated into a general view that the MOOC phenomenon is really a passing fad and if everyone holds out long enough, it will go away.

But the recent past is littered with industries that thought this when their turn came to be disrupted by both the Internet and the concept of “Free”.

Take the CEO of music company HMV who said:

“Downloadable music is just a fad and people will always want the atmosphere and experience of a music store rather than online shopping.”

or HBO Co-President Eric Kessler who said:

“the move away from traditional television to an internet-based model is just a fad that will pass – a “temporary phenomenon” tied to the down economy”

Of course there are more examples like this. All from people who believed that somehow what they did was special and unique and anything that didn’t offer the full experience would never be as good and would be rejected as a “passing fad”.

What is overlooked with the industries that have been disrupted by the Internet and Free is that they were already ailing. The battles to modernise the way newspapers were produced preceded the Internet and were being fought out in the late 80’s in Wapping, UK.

And so it is with Higher Education, with academic Clay Shirky who has argued that MOOCs are an answer to a higher education system that is already failing in the US.

But let’s come back to the question of the business model of MOOCs for universities and the question of giving away something for Free. Chris Anderson, in his book “Free: How Today’s Smartest Businesses Profit by Giving Something for Nothing” deals with the subject of the many companies and industries that have created businesses around the concept of giving something away for Free. Again, this pre-dates the Internet, but it is also something that universities, in particular research universities have been doing for some time.

Research rarely pays for itself, even with government funding and so at most universities, it is subsidised by teaching. Salaries of academics working on grants are rarely paid for. The university that they work for makes an “in-kind” contribution towards the research. Some of this is recouped from extra funding from the Government (in Australia at least) but it never covers the full cost. Academics go further, the research is normally published in journals who do not pay the academics for their work. Beyond making the work available in an officially recognised capacity, they do nothing to promote that work but they profit from it. Again, the universities have given away something for Free. And finally, the research itself is normally contributed into the public domain where anyone can profit from it. Rarely does the university that donated it do so.

So why have universities engaged in a practice for hundreds of years that effectively contributes knowledge to the world using a business model that has consistently made a loss and in most cases, gives away its products for Free?

Because that is what universities are there for. They are there to create and contribute knowledge to society and to use that knowledge to enhance the teaching of students, not necessarily just those at their own institutions.

However, and in line with Chris Anderson’s arguments about the power of Free, the research that universities have done has had a side effect. It has been used to establish reputation which in turn has influenced the choice of students wanting to come and study at those institutions. This has been accentuated in recent years with the advent of university rankings such as the Shanghai Jiao Tong Academic Ranking of World Universities which is based on the research performance of universities world-wide.

So universities enjoy a virtuous circle. They give away some things for Free that encourages students to come and pay money to be educated that in turn provides money to do more research.

For the universities that are providing MOOCs, there is no question that it has been a huge benefit to their reputation on a scale that advertisers and their public affairs and marketing offices could only dream about. MOOCs have reached an audience of millions of students, many of whom have now experienced something of the learning experience of the institutions that offer these courses. It has enhanced the brands of universities who are now seen as being progressive and altruistic, turning the universities and academics into household names. Achieving this through traditional advertising campaigns would cost substantially more than the relatively trivial costs of putting on MOOCs.