Paper Critical of MOOCs’ Economic Impact on Colleges

Ever since massive online open courses first splashed down just over a year ago, they have been enthusiastically greeted by almost everyone hoping that they will serve as a disruptive force in a higher education system that many have accused on being ossified and no longer serving the needs of its students or the country’s economy.

However, in the last few months there have been a number of dissenting voices pointing out that we can’t embrace MOOCs until the full implication of adopting the new approach have been examined.

Among those voices is Michael A. Cusumano, a professor at Sloan School of Management at Massachusetts Institute of Technology, who recently published a paper in the magazine of the Association for Computing Machinery calling for a closer look at the economics of widespread MOOC adoption. Prior to publication, the MIT colleagues who read the paper were so impressed with it that Cusumano was asked to become a member of the school’s task force examining its future online initiatives.

The gist of the paper is that schools that embrace MOOCs because they’re free are badly misreading the situation. In reality, if universities turn to MOOCs as a way provide college education on the cheap, the higher education landscape could soon become the domain of a small number of elite schools with the rest being left by the wayside.

Mr. Cusumano’s concerns grow out of his study of the software and media industries in the face of price pressure from free, open-source software and digital distribution over the Internet. Two-thirds of the public companies in the software industry disappeared between 1998 and 2006, as companies failed or were acquired. In the media world, Mr. Cusumano contends that newspaper and magazine companies — including The New York Times Company — made a strategic mistake by giving away their publications free on the Web. The online pay walls that publications have since put up, he said, seem to be helping to stabilize things, but only after a precipitous decline.

Much like book publishers who worried that Amazon’s aggressive e-book pricing would permanently reset the threshold at which customers expect to be able to purchase books, Cusumano worries that by getting people used to the price of higher education being zero or close to it, colleges will be unable to create a revenue stream for themselves high enough to cover their costs.

While large universities with healthy endowment funds will be able to withstand the loss of income that will inevitably come with a subsequent reset to a higher prices, smaller schools – especially those that draw low-income students – might suffer a financial collapse.

“In education,” Mr. Cusumano adds, “‘free’ in the long run may actually reduce variety and opportunities for learning as well as lessen our stocks of knowledge.”

Later he writes: “Will two-thirds of the education industry disappear? Maybe not, but maybe! It is hard to believe that we will be better off as a society with only a few remaining megawealthy universities.”