ExtensionEngine Blog

A Financial Model for Online Programs: Revenue Sharing vs. Fee-for-Service Engagements [White Paper]

It doesn’t take a genius to figure out that the earliest decisions made for a new venture are often the most important. This is especially the case when an institution of higher learning is considering the launch of an online learning program.

In a way, it was easier a decade ago. Some colleges and universities already had platforms hosting downloadable supplemental materials that supported classroom teaching; they added complete courses to these platforms. This limited what faculty could design into the course, but it was a beginning.

Institutions that had never offered online components generally turned to online program management providers (OPMs) to get them started. Many of these were major publishers, like Pearson, who had been developing online components in support of their textbooks. This background gave them the knowledge, experience and in-house talent to produce complete college courses for clients.

Download A Financial Model for Online Programs: Revenue Sharing vs. Fee-for-Service Engagements White Paper Now

Furthermore, the OPMs were willing to invest their own money into college and university programs for a share of future revenues, thereby assuming virtually all of the financial risk. Who could say no to that? Many institutions said yes, and until recently, that was how most online programs came to be developed at dozens of colleges and universities.

In 2017, an institution thinking about launching an online learning program has another choice: the fee-for-service model. In this case, the college or university hires an outside contractor, like ExtensionEngine, to develop the program for a fee, then keeps all future revenues.

Which is better? That is the question. It really depends on the numbers — and the numbers depend on the interaction of many factors.

ExtensionEngine Principal Learning Strategist Scott Moore decided to simplify the situation for both new programs and established programs whose OPM contracts are due to expire soon. He developed a financial model that compares outflow and income for an online learning program developed via each option. It takes into account eight different variables to provide customized numbers for each institution — and it’s available to use at no charge.

You can learn more about this financial model by downloading Moore’s white paper, A Financial Model for Online Programs: Revenue Sharing vs. Fee-for-Service Engagements. It reveals:

  • How the model was developed
  • The variables involved
  • An example comparison,
  • How to access it to run your own analysis

We think Moore’s financial model is an excellent way to get a feel for the different options available. There is no one right answer for everyone. In the end, it’s all in the numbers.

 

Download A Financial Model for Online Programs: Revenue Sharing vs. Fee-for-Service Engagements White Paper Now