New Business Models for Higher Education

by Rob Reynolds | Mar 21, 2019 | The Future of Education

In yesterday’s Education Futures podcast, I shared some ideas about how a recession might affect and reshape higher education. One of the possible outcomes I mentioned had to do with the emergence of new business models in the sector. One of those models was the continued growth of mega-universities like Arizona State University.

And, the next thing you know…Arizona State has announced the creation of a new for-profit spinoff to court students in the workforce.

Arizona State’s new venture, which the university calls a “learning-services company,” will focus on developing partnerships with employers to attract more students to the ASU’s online programs, in the vein of its partnerships with Starbucks and Uber. The university is also looking for other research universities to join the venture.

Also related to evolving business models in higher education, the University of Akron is offering to buy out the contracts of almost half its faculty.

The University of Akron will offer to buy out 47 percent of its faculty, according to Cleveland.com. The deal is 100 percent of 2019-20 base bay, paid out in two installments, with a separation date of May 2020. Only full-time, permanent professors not teaching in what Akron calls “strategic investment areas” are eligible — some 340. Akron is currently trying to trim $15 million from its budget, due in part to decreased enrollment. Professors will have until the end of May to decide on the offer. The university said last week that it would put on hold plans to potentially reorganize colleges and programs, but that reorganization talks would resume if faculty, staff and administrators didn’t make progress toward certain goals. Those include removing barriers to working across academic programs.

This type of faculty restructuring is something I expect to see many non-research universities do in the coming years, as it allows institutions to create more agile instructional frameworks that can handle general education courses cost effectively while also adapting quickly to emerging skills/jobs markets.

Interestingly, this is not dissimilar to the type of restructuring we have seen some educational publishers go through as they prepare for new business models. Cengage provides a good example of this type of systemic change. The company filed for bankruptcy in 2013 but emerged a leaner company willing to reinvent itself to remain relevant.

Of the several risks that Cengage has taken [related to Cengage Unlimited, its new subscription service], two in particular are major. One has to do with the gargantuan task of clearing rights to material from thousands of authors over a long period of time. Cengage decided to launch the service with all of its content and not allow authors to opt out. Undoubtedly, much of the content was written under author contracts that did not envision this type of usage. Sure enough, authors have filed (and settled) purported class action lawsuits against the publisher, and it has started an effort to reach out to authors proactively to settle royalty claims.

As someone who has worked in both higher education and educational publishing (for Cengage and McGraw-Hill), I would say that the change in author royalty models and rights to create a Netflix-type subscription model for textbooks is on the same level of disruption as overhauling faculty organization and tenure models at non-research universities. In both instances, we’re talking about systemic shifts that allow organizations to change their product and financial models to address uncertain futures.

Rob Reynolds, Ph.D.
Executive Director, TEL Library

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New Business Models for Higher Education

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