What's the current state of OPM and UK university partnerships?
As a type of technology company, several online education companies have experienced the kind of turbulence that’s been prevalent across the tech sector as a whole. For some, their lack of profitability and/or valuation has been exposed by an altered macroeconomic climate and there have been layoffs as well as several acquisitions, changes in strategies and leadership.
However, we’ve seen no huge demise of online education companies that work with UK universities. Although these companies have been affected by well-documented issues, universities continue to partner and work with them. New partnerships continue to be established and there is still appetite to use online education companies to further UK universities aims in this area.
Since my last post exploring partnerships between UK universities and private online education companies there have been another number of new partnerships established between online programme management companies (OPMs) and UK universities. There are also a number of these currently in the works and 2023 may see the most new partnerships for a few years.
What’s the rate of OPM partnership growth?
I’ve been analysing UK university partnerships with online education companies over many years now looking at over 175 HEIs in the UK.
The rate of growth of these partnerships continues steadily and on average 5-6 partnerships are established each year dating back to the mid 2010’s. To date, there are nearly 50 OPM and UK university partnerships that exist focussed on online degree programmes.
If you were to add in partnerships with other online education companies for different types of online learning, such as MOOCs, short courses, certificates & microcredentials the number is far higher.
In terms of types of universities, Post-92 universities have the most number of partnerships, however Russell Group universities are not far behind with nearly half of them establishing partnerships with OPMs.
In reality, OPM partnerships aren’t overly dominated by a particular type of university. They are spread relatively evenly across different types of universities, which in the UK are categorised by institutional age and/or standing.
Do the end of some partnerships point to a bigger trend?
Whilst the trajectory of growth in partnerships continues, there have been a couple of universities who have brought their OPM partnerships to an end recently.
Although these developments might hint at some trend there’s no robust evidence to suggest that this is a larger trend of UK universities moving away from OPM partnerships to go it alone.
That’s not to say that in time some universities may seek greater independence. However, by my analysis there is only one UK university that instigated a current partnership over 10 years ago and the next long-standing partnership that existed was renewed for another 10 year term. So there is a few years to go before the 10 year mark for the majority of partnerships which although doesn’t preclude early reviews is more of an obvious point of reflection.
Who are the OPM players in the UK?
There are increasingly clear tiers in terms of the number of partnerships that OPMs have with universities.
CEG Digital followed by Higher Ed Partners (HEP) have the most partnerships in the UK and both companies have pretty much dominated the last few years by growing their number of partnerships more significantly than the rest.
The second tier is the domain of the OPM arms of two publishers; Pearson and Wiley, (more on Pearson later). There is then a large third tier of companies who have a small number of partnerships. These include companies like InteractivePro, Kaplan Open Learning, OES, Keypath, 2U, Learna and UNICAF.
In addition to these companies, Coursera are also now much more strategically focussed on online degrees and whilst in the past my analysis has demarcated between OPM companies and MOOC platforms that distinction grows less and less relevant.
Coursera recently launched their first online degree with the University of Leeds. This adds to the degrees offered by Imperial College, Queen Mary University and the University of London on their platform.
One other point to make here is that online degree programmes primarily at postgraduate level, still dominate in respect to the types of courses these partnerships result in. Despite continued noise about shorter courses, microcredentials et al - the online degree is still the main unit of currency.
The story is the companies themselves…
In many ways the most notable things to report since my last update are all focussed on the online education companies themselves. This can be wrapped up pretty neatly under the banner of acquisitions, and is set against a backdrop of a number of negative financial results last year which I talked about here.
Although CEG Digital weren’t included in those reporting negative results, parent company Cambridge Education Group looks likely to be acquired soon- with the most recent public news naming three organisations in the running.
As well as this Pearson’s OPM arm - Pearson Online Learning Services (POLS) has just been sold to private equity firm Regent. This follows a strategic review from Pearson of this part of the business, but it’s been known for some time by industry insiders that POLS was up for sale.
In some ways it appears a more unusual type of deal, with the buyer Regent not paying anything upfront. The deal appears to be Regent taking on the task of turning POLS around into a profitable business with Pearson gaining a percentage of profits over a number of years and proceeds of a future sale.
Turning around POLS may be a very significant ask, Pearson clearly didn’t see much merit in continuing with an OPM business and it’s worth saying that POLS have been on a somewhat downward trajectory. Losing a huge client like Arizona State University and then Ohio University in the US will have been a blow and there have been less than favourable noises in the UK around some of their university partnerships. Whilst this development inevitable says something about the OPM landscape as a whole, it’s also important to hold in mind the performance of POLS in relation to other OPMs when evaluating this development.
In any case, this news adds to other interesting acquisitions amongst online education companies that partner with universities. The most significant in the UK context has been FutureLearn’s acquisition by Global University Systems (GUS). Whilst GUS are not exclusively an OPM they own InteractivePro and own universities who offer online programmes. It could be argued that what we’re seeing with FutureLearn is the merger of MOOC platform and OPM, which correlates with 2U’s acquisition of edX back in 2021.
Programmes from one of InteractivePro’s university partners now feature on the FutureLearn platform, and this is arguably one of the benefits of this melding of OPM and MOOC platform. It offers platform-based marketing for OPM-university degrees, whilst on the other hand furnishes MOOC platforms with a greater portfolio of online degrees that some have struggled to grow.
2U have really invested in this platform model and in their Q4 2022 earnings call they reported that
“marketing and sales expense as a percent of revenue declined to 34% in the fourth quarter, the lowest it’s ever been. In 2022, we reduced paid marketing by $47 million when compared to 2021 and we generated revenue above our expectations despite lower marketing spend..Our organic lead generation from edX is strong, accounting for 37% of organic leads in the fourth quarter. The quality of organic leads provides confidence in the sustainability of our marketing efficiencies and our ability to leverage the power of the edX platform to drive enrollments.”
This seems to point to the platform strategy driving down marketing expenditure whilst not impacting negatively on enrolments. Given marketing is what OPMs spend a lot of their money on - this marrying of OPM and MOOC platforms could provide a newer, more sustainable model given the new financial realities.
Is this the beginning of the end of the revenue share model of OPM partnerships?
A new model of OPM and university partnerships may not just be desirable in the future but also necessary. This is due to potential changes afoot in the US, allow me to explain.
The US currently prohibits HEIs
“from providing any commission, bonus, or other incentive payment to individuals or entities based, directly or indirectly, on success in securing enrollments or financial aid to any persons or entities engaged in any student recruiting or admission activities or in making decisions regarding the award of student financial assistance” ..and “direct payments to recruiters based on tuition generation are considered prohibited incentive compensation”
However OPM and university agreements almost always entail the OPM driving recruitment and taking tuition fee income of typically 50% over a long term contract (e.g. 10 years) but back in 2011 guidance was issued that
“specifies that providing a set of services that includes recruitment (known as bundled services) does not violate the prohibition on incentive compensation”
So OPMs who typically provide a whole range of services were not in violation of this prohibition. However recently the US Department for Education’s announced a review of this - stating that
“Since issuing that guidance, the number of students who were recruited to institutions by entities operating under this bundled services exception has increased significantly particularly through online programs operated by third-party entities, including Online Program Managers (OPMs).” And “the Department is seeking to better understand the impact of the bundled services exception in the context of growing online enrollment and associated Federal student loan debt.”
So this exception is under scrutiny and the US Education Department will hold “listening sessions” considering questions such as
“How would changing third-party servicer contracts from a revenue-sharing model to a fee-for-service model impact the services, such as recruitment, currently provided to an institution under the bundled services exception?”
This hasn’t come as a huge surprise as it’s been brewing for a while now, but if changes go ahead it seems likely to be the death knell for OPM and university contracts based on tuition revenue share in the US.
Whilst there are fee-for-service OPMs out there such as Noodle, the majority if not all of the OPM contracts with UK universities will be based on a traditional revenue share model.
There has been barely a whisper in the UK of changes to this model and there have been plenty of new partnerships of 10 years or more with a 50/50 revenue share. However, this potential change may impact the UK, but exactly how is too early to say.
Seasoned US EdTech analyst Phil Hill has speculated that if this change goes ahead it could lead to more market consolidation and acquisition of small market players, and/or that OPMs may just start to focus on prospective students outside of the US. This change may also result in other countries instigating similar policies, but given how little this is spoken about and the level of awareness in the UK, one wonders if this has even registered amongst the bodies that might even consider it.
Nevertheless, we can only speculate at the moment about what might happen if and when the US Education Department brings an end to the bundled services exception and what the detail of that change looks like.
OPMs acquiring learning design and production companies
One last development of note in this space is OPM acquisitions of what might be described as learning design & production service companies. The US OPM Noodle recently acquired South African company Hubble Studios and OES followed this by completing their acquisition of Construct Education stating in their release announcing the closing of the deal that:
“Construct provides the OES group the ability to develop standalone learning design services through an existing provider, with an immediate client base, a track record of client wins, and established learning design and ed-tech capability.”
This also hints at another future trajectory for the OPM model in which unbundled services become more significant. These more discrete services are something that a number of UK universities have taken advantage of, and/or have developed framework agreements to enable them to work with online education companies in this way.
Shifting sands
What is clear in this last period is that the demand for the services that private online education companies provide is not diminishing amongst UK universities. This is in spite of a difficult environment that has led to poor financial results and viability for companies and subsequent acquisitions.
Partnerships between OPMs and UK universities continue at a steady rate and this year may see the biggest number of new partnerships established for a few years. This is linked to online distance education becoming a bigger strategic priority for more UK universities.
Whilst demand for services appears consistent the real fluctuation has been amongst the companies themselves which may lead to wider changes. Universities considering OPM partnerships now more than ever need to have a good understanding of the different players in the market, keep abreast of the shifting sands in this landscape and really do their due diligence.
