Eduventures Richard Garrett's Online Higher Education Market Update 2008 National & New York Data

Online Higher Education Market Update 2008
National and New York Data

Online Higher Education Learning Collaborative
Eduventures, LLC

February 2009

Overview

Overview of the Online Higher Education market
• National Market: sizing, segments and forecasts
• National Market: positioning and differentiation
• New York: selected data and observations

2
Copyright © 2006 Eduventures, LLC.
Copyright © 2009 Eduventures Inc

About Eduventures
Eduventures founded in 1993
Research and consulting
Learning Collaborative for Higher Education
• Increasingly competitive/complex higher education environment:
need for data-driven decision making focused on common functional
areas
• Member-driven, shared-cost model
OHE-LC (Online Higher Education Learning Collaborative)
• Focused on online market expansion and characteristics, program
development, and institutional strategy and operations
- Increase/rationalize enrollment growth
- Increase operational efficiency

Schools benefit by leveraging the knowledge and experience of the
program membership and OHE-LC staff.
3
© 2009 Eduventures, Inc.

OHE-LC Membership, February 2009
92 members

• Public
- e.g. Empire State College, University of Illinois, University of
Wisconsin Extension, University of Indiana, Rio Salado College
• Private
- e.g. Drexel University Online, Norwich University, Park University,
Liberty University, Nova Southeastern, Western Governor’s
University
• For-Profit
- e.g Laureate Education, Kaplan University, Capella University,
EDMC, DeVry, APUS, Northcentral, Ashford, Corinthian

4

Value for SUNY Learning Network…
Unique, groundbreaking studies on online market
trends
Peer networking- monthly roundtables featuring Capella,
Drexel, Nova, APUS, Kelley, Franklin, UMassOnline etc;
plus Annual Member Meeting
Unlimited quick turnaround custom research (phone,
memo or data)- data points, perspective, synthesis,
market overviews
Larger-scale custom research- primary research,
broader scope
Campus visit

5

The National Online Higher
Education Market:
Sizing, Segments & Forecasts

6


c.18% of all
Online Market Size and Forecast students

At 2010 base, 3,465,991
3,500,000 50%
14% growth
3,214,990
would be biggest
47% Online Headcount
45%
net addition in
Growth
3,000,000 history 2,878,213
40%
2,535,674
c.10.6% of
2,500,000
35% 35%
all students
2,194,932

31% 30%
27% 1,923,599
2,000,000
1,707,945
25%
Forecast impact of
(perceived) severe
22%
1,400,672
1,500,000
recession 20%
1,101,346
16% 15%
14%
1,000,000
14%
843,931
13% 12%
623,563 10%
8%
425,575
500,000
5%

0 0%
2002 2003 2004 2005 2006 2007 2008F 2009F 2010F 2011F 2012F 2013F 7
Copyright © 2006 Eduventures, LLC. 5
Source: OHE-LC data, NCES and OHE-LC staff analysis. Fall entry

Notes…
Degree-granting, Title IV schools only; Fall entry
Online= 80%+ of formal instruction online (not online
courses part of an otherwise campus-based experience)
Historical base estimates revised down somewhat- in light
of better evidence
Assumption of major recession from Q4 2008 through at
least 2009- where cyclicality (weakness in some non-
military tuition assistance, corporate training, consumer
confidence) may somewhat offset conventional counter-
cyclicality
Comparison with Sloan-C online course-level
numbers/trends from 2007 report (9% growth from 2005
to 2006). Eduventures sees stronger growth at program
level, including in terms of increased institutional
participation
Estimates based on extensive but incomplete, often
ambiguous data 8


Adult Student Trends, Fall 1995-2007
So some evidence that for-proﬁt/online
Adult Undergraduates- 12% increase
may have grown the overall adult market;
1995-2007 (despite 1.5% drop in 25-44
6,000,000 60.0%
BUT falling adult market share (36% in
population 2000-2007)
1995 to 31% in 2007) compared to
traditional students
5,000,000 50.0%

4,000,000 40.0%

3,000,000 30.0%
Undergraduate # Aged 25+
Traditional age students Graduates 30+-
Graduate # aged 30+ grew by a third at both 25% increase
Undergraduate % Aged 25+ undergraduate and 1995-2007
2,000,000 20.0%
Graduate % Aged 30+ graduate level between (despite negative
1995-2005 demographics)
1,000,000 10.0%

0 0.0%
9
Y1995 Y1997 Y1999 Y2001 Y2003 Y2005 Y2007
Source: NCES and OHE-LC staff analysis

Dynamics of online growth to 2013…
Steady normalization of online delivery in terms of institutional/faculty
participation and consumer familiarity. Recession-induced
entrepreneurship v. conservatism. More competitive/differentiation
Unmatched convenience; indirect cost savings (gas prices); growing
sophistication/disciplinary range
Evidence that online may have significantly grown adult participation
between 1999 and 2007, and likely continue to do so
Online focus and funding stability of military market; plus new GI Bill
No let up in skills obsolescence, need for higher order skills, career
change. Online as cost-efficient solution for consumers/firms
Recession-induced tuition hikes, physical capacity/funding constraints
of public schools, less traditional student body and online
normalization will persuade a growing number of adults and (still
forecast to be a modest proportion) of traditional age students to opt
for online study
Estimated dollar size of the online market- $6.2B (2005), $11.7B
(2008); forecast of $26B (2013)
Outcomes data still very limited
10

Key variables/unknowns
Nature of Downturn. Perception, severity, impact. Net cyclical or counter-
cyclical?
Adults. Post-2013, double-digit growth may be inhibited by upper limits
(40%?) of online share of adult market (unless online more clearly grows the
adult market overall), and interests of campus-based institutions to maintain
online/campus balance
Traditional Students. Possibility that traditional age student participation
online at program level will be post-2013 growth vehicle, given low base (est.
5% in 2013, up from c.1.5% today) and strengthening drivers. Possibility of
growth reacceleration
International. Possibility that online may become a significant vehicle for
cross-border higher education- driven by cost and security issues, as well as
capacity constraints of conventional higher education in the face of growing
unmet demand. Source of growth post-maturity of online domestic market?
Fall v. 12 month headcount. IPEDS shows 12 month unduplicated
headcount to be 29% higher than Fall headcount (21.9m 2003/04 v. 16.9m
Fall 2003). 100% online schools, where multiple entry points are common,
report average c.75% higher 12 month headcount. Norm of Fall reporting in
U.S. higher education may significantly undercount online market size. Value
of Fall reporting is significantly enhanced ability to benchmark online
headcount against sector as a whole
11


By Control (Estimate- Fall 2008)
80% 1,200,000
74%
70%
1,028,000
Online Market Share 1,000,000
Higher Education Market Share
60%
53%
Online Headcount
800,000
50%
620,000
40% 600,000
32%
30%
275,000 400,000
19%
20%
14%
200,000
7%
10%

0% 0
For-Profit Private Non-Profit Public 12
Source: OHE-LC data, NCES and OHE-LC staff analysis.

Commentary and Forecast by Control
For-profit schools retain vastly Online
Market Online
disproportionate share of online Forecast, Share Headcount
market (c.32%), compared to Fall 2013 (+/-2008) (+/- 2008)
share of higher education
1,040,000
students generally (c.7%) For-Profit 30% (-2%) (+c.400,000)
For-profit strengths remain-
Private Non- 416,000
speed to market, execution, Profit 12% (-2%) (+c.140,000)
marketing spend/technique,
customer service, online fit with 2,010,000
Public 58% (+5%) (+c.1,000,000)
mission
Pressure on for-profit share- 3,465,991
TOTAL 100% (+c.1,500,000)
steady normalization of online
at publics with local/national
brands, and often much lower
prices points

13


Est. Online Students by Credential (Fall, 2008)
70%
Relative weakness at undergraduate
level- relatively few online programs at
community colleges; less academically
59.1%
experienced demographic; stimulus of
60%
Axia College at associate level;
emphasis on completion programs at
% of Online Market
bachelor’s level
50%
46.5% % of Offline Market

Relative strength at graduate level-
40% short master’s programs; more
Est. Online Headcount &
academically experienced
Market Share, Fall 2008
demographic; older consumer places
28.4% 28.3% higher value on convenience; greater
30% Associate= 339,000 (c.7.9%)
institutional comfort for
22.2% Bachelor’s= 708,000 (c.7.9%) experimentation
20% Master’s= 431,000 (c.21.3%)
11.4%
Doctoral= 46,000 (c.24.1%)
10%
Undergraduate= c.7.9% online
3.0%
1.0%
Graduate= c.21.5% online
0%
Associate Bachelor's Master's Doctoral

14
Source: OHE-LC data, NCES and OHE-LC staff analysis. Excludes certiﬁcates, ﬁrst professional and non-credit

Est. Online Headcount by Field (BA, Fall 2008)
In General but NOT online Top 10: Visual &
300000 30%
Online as mainstream Performing Arts, Engineering, Biological/Biomedical
Sciences (1m+ students)
25%
250000 25%
Est. Online Bachelor's Headcount
Est. Online Market Share

200000 20%
Ripe for
18% development?
16% 15%
c.800,000 student
150000
14% market
13% 11%
9%
8%
100000 10%

5%
6%
50000 5%

0 0%
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Source: OHE-LC data, NCES and OHE-LC staff analysis 15

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Est. Online Headcount by Field (MA- Fall, 2008)
140000 45%

Est. Online Master's Headcount 40% 40%
120000
Est. Online Market Share
35%
In general, online is relatively
100000
31% 30%
more signiﬁcant at master’s
compared to bachelor’s level-
26%
80000 25%
smaller, more conducive market
21% 20%
60000 19%
15%
14%
15% 15%
15%
40000
10%
9%
In General but NOT online Top 10: Legal Studies,
Biological/Biomedical Studies (c.200,000+ students)
20000
5%

0 0%
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16
Source: OHE-LC data, NCES and OHE-LC staff analysis

Positioning and differentiation trends
Current explanation of online growth will remain very important-
convenience, flexibility, adult learner, geography, programming,
marketing, operations
More sophisticated consumers means prospective student decision-
making should become more demanding and rational
Many schools will embrace differentiation strategies that suggest
opportunities to go beyond “natural” assets (e.g. parent
characteristics, local visibility), without the option of outspending the
competition
In a maturing online market, “online” will continue to diversify, schools
will become more self-aware of the nature/value of current
approaches/assets, and will do more to position this to the market
On this scenario, more nuanced aspects of online offerings (e.g.
platform, pedagogy, support services, partnerships, student body,
scheduling, outcomes etc) will become much more developed and
visible, and necessitate a more complex explanation of online value
and for online growth
17

Positioning and differentiation across 18
areas and 100 schools Source: Competing in Online Higher Education 2008, Parts 1-3
(OHE-LC, 2008)

1. Common Positioning 2. Uncommon Positioning
Undifferentiated Undifferentiated
Faculty Alumni
Financial Aid Awards and Rankings
Pedagogy/Student Experience Credit Transfer
Pricing News Section/Blogs
Scheduling/Acceleration Partnerships
Status/Experience/Size Platforms
Student Body/Diversity
3. Common Positioning 4. Uncommon Positioning
Differentiated Differentiated
Programming Outcomes
Student Support Programmatic Accreditation
Values
18
21

Conclusions…
Online headcount forecast to reach almost 3.5 million by 2013
(c.18% of all students)
Current economic downturn may initially slow growth in short-
term; online will then become strongly counter-cyclical
Post-2013, more significant traditional student or international
participation may be key to further expansion
Evidence regarding current prospective online student
decision-making helps explain the relatively undifferentiated
online value proposition characteristic of the current market
A maturing market, in every sense, is forecast to drive a more
nuanced and diversified approach to positioning and
differentiation
This scenario may be more supportive of growing the online
market into additional disciplines and demographics
Multiple opportunities for online active schools to differentiate;
building on threshold standards
19

Online Higher Education in
New York State:
selected data & observations

20

Adult Student Undergraduate Enrollment at
NY Schools, 1995-2007
300,000 40.0%
271,725
258,833
255,096 251,377 35.0%
247,583
250,000 234,317
224,996
30.0%

200,000
25.0%

Growth 1995-2007: -8.9%
150,000 20.0%
Undergraduate # Aged 25+ at
NY Schools
15.0%
% of all undergraduates at NY
100,000
SUNY Schools: -18%
schools
10.0%
(c.35,000 in 1995 down
to some 29,000 in 2007)
50,000
5.0%

- 0.0%
Y1995 Y1997 Y1999 Y2001 Y2003 Y2005 Y2007

21

Enrollment & Population- U.S. v. NY
50.0%
Trends: Both NY and U.S. saw traditional age
42.9%
40.0% undergraduate growth far in excess of population
40.0%
growth. By contrast, while the U.S. saw above
U.S. population growth among adult undergraduates,
30.0% NY saw below population decline. WHY?
NY
20.0%
12.3% 11.8%
9.0%
10.0%

0.0%
-1.4%
-10.0%
-8.9% -7.8%

-20.0%

Under 25 18-24 population Over 25 25-44 population
Undergraduate 1995- (2000-2007) Undergraduate 1995- (2000-2007)
2007 2007
22

Top 20 Adult Serving NY Schools- Online Presence
School Adult Students 25+ Fall 2007 Online Category
Excelsior College 33,117 Major
New York University 17,260 Emerging
Columbia University in the City of New York 12,433 Emerging
Touro College 10,679 Major
SUNY Empire State College 10,664 Major
CUNY Hunter College 8,482 Courses only
SUNY at Buffalo 7,721 Emerging
Stony Brook University 7,485 Significant
CUNY Queens College 6,948 Courses only
CUNY Borough of Manhattan Community College 6,537 Courses only
CUNY Brooklyn College 6,410 Little or none
Suffolk County Community College 6,261 Courses only
CUNY Bernard M Baruch College 6,075 Little or none
Monroe Community College 5,765 Significant
CUNY City College 5,520 Courses only
Fordham University 5,504 Little or none
CUNY Lehman College 5,362 Courses only
Mercy College-Main Campus 5,253 Significant
CUNY LaGuardia Community College 5,028 Courses only
Nassau Community College 4,945 Courses only
23


Observations…
NY degree-granting schools experienced a net loss of adult
undergraduates between 1995-2007 (-8.9% compared to 11.8%
nationally); SUNY schools experienced even steeper decline (-18%)
Partly explained by NY’s steeper than average 25-44 population
decline between 1995-2007?
Also, NY experienced very strong increase in traditional age
participation- up 42% over the period (SUNY schools up 24%)
Compared to many other states, NY exhibits relatively few major
online players, with much activity at course rather than program level
Within SUNY LN- little online bachelor’s activity outside Empire State
College; predominance of online associate programs (but typically not
from SUNY schools that enroll most adult students)
Eduventures consumer data shows average, or perhaps above
average interest in online study among NY residents. Also, above
average educational attainment- impact on online activity?
Hypothesis: weaker adult population/enrollment, and robust
traditional student enrollment, have dampened online program
development in NY to date? Or, has relative lack of online programs
dampened adult student enrollment? Might post-2009 fall in
traditional student numbers, and booming adult figures, spur more 24
online activity?

Thank you
Please direct any feedback or questions to:

Richard Garrett
Program Director & Senior Analyst, OHE
Eduventures, LLC
Prudential Tower
10th Floor
800 Boylston Street
Boston, MA 02199
617-532-6081 (Direct)
rgarrett@eduventures.com

25

Eduventures Richard Garrett's Online Higher Education Market Update 2008 National & New York Data

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