Can Premium MOOCs Find an Audience?

This is part of an ongoing series on the profitability of MOOCs. Click below for the other entries.

Part 1: Can Free MOOCs Be Profitable?
Part 2: Can Premium MOOCs Find an Audience?
Part 3: Proven Profitability: The Freemium Vertical Integration MOOC Model
Part 4: Can We Convince People to Pay for MOOC Certificates?
Part 5: Are MOOCs Effective Advertisements?

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In the previous installment, I discussed the barriers to making free MOOCs profitable. To summarize, although such classes are popular, the only real way to draw in revenue is to run advertisements. Unfortunately, ad rates are abysmally low. A class might need 20,000 students to complete a course before reaching a very narrow definition of profitability.

So if MOOCs need to turn a profit, the obvious solution is to start charging for them. Even just 300 students paying $10 for a course matches the revenue 20,000 students bring in through a free course. MOOCs have such immense popularity, surely providers can convince a tiny fraction to pay a small amount of money. Right?

Don’t count on it.

Premium MOOCs face two major obstacles. First, it is not clear why anyone would want to pay money to watch online lectures. Many students take MOOCs purely as a form of entertainment, which has contributed to the abysmally low MOOC completion rates. Since 90% of enrolled students never complete a course, it is safe to assume that current registration rates will immediately drop at least 90% once providers start charging anything. And while some might find Ancient Greek Religion appealing, they might not find it to be as appealing as keeping $10 in their wallets, especially since academic courses offer little practical use to the vast majority of MOOC students.

Academic was a major caveat there. Udemy, likely the biggest name in MOOCs without any official university backing, appears to have had some success in offering applied courses. For example, look at their top premium business courses. Some of these classes have drawn in a large number of students, and the reason is obvious–paying to learn Excel is much more sensible than paying to learn the Psychology of the Mind for the average person in the workforce. Moreover, it wouldn’t be surprising if many of these “students” are actually businesses themselves, which use courses as training tools for their employees.

That said, we should take the enrollment figures with a grain of salt. This Excel basics course has more than 38,000 students, but not all of them necessarily paid the $99 price. Udemy encourages their teachers to use social media to attract students, using Reddit in particular to generate buzz. Udemy’s logic is sound–social media attention helps increase the site’s market share, and it can help a course attract good reviews to convince others to pay money. (Indeed, the Excel course has more than 400 reviews and an average rating of 4.5 out of 5.) Some teachers are raking in full-time salaries here, but this is not the massive gold mine that it might appear to be.

The second major obstacle is that it makes little sense for a consumer to purchase a course when they can take a similar course for free. Consider my Game Theory 101 MOOC. During the school year, I have about 2000 students watching my lectures per day. If I started asking for $10 per course, would the 200 people–the 10% committed to the entire course–continue using my materials? Or would they switch to the competition from Yale or Stanford/UBC? I’d like to think my introduction is the clearest of the courses, but I have no delusions that I would keep my audience. If I could get even two students a day, I’d be thrilled.

MOOC providers are aware of this problem, and they are scared. As Americans discovered the Internet, the newspaper publishing industry willingly put their material online for free. Customers liked this, canceled their physical subscriptions, and became accustomed to receiving their news for free. A decade later, newspaper publishers are having an impossible time convincing customers to pay for something they now view as unworthy of payment.

Right now, the major university-backed MOOC providers continue to push free courses to gobble up market share. Coursera and EdX might benefit if they could mutually switch over to a premium model, but they run into coordination issues and risk drawing another provider into the market pledged to keep classes free. Nevertheless, there is real hazard that the providers will eventually back themselves into a corner like the newspaper publishers, unable to find customers at a price greater than $0.

Overall, it appears that academic courses face significant obstacles to charging for their material. But if paid courses can’t bring in students and free courses bring large number of students but next to no revenue, what can work? In future posts, I will see if freemium models have any promise.