Wednesday, March 20, 2013

How Harvard, MIT plan to earn from EdX

How can a nonprofit organization that gives away courses bring in enough revenue to at least cover its costs?
Officials of Harvard and MIT at the launch of EdX last year
That's the dilemma facing edX, a project led by Harvard University and the Massachusetts Institute of Technology that is bringing in a growing number of high-profile university partners to offer massive open online courses, or MOOCs.
"Even though we are a nonprofit, we have to become self-sustaining"
Two other major providers of MOOCs, Coursera and Udacity, are for-profit companies. While edX has cast itself as the more contemplative, academically oriented player in the field, it remains under pressure to generate revenue.
"Even though we are a nonprofit, we have to become self-sustaining," said Anant Agarwal, president of edX. And developing MOOCs, especially ones that aspire to emulate the quality and rigor of traditional courses at top universities, is expensive. Harvard and MIT made an initial investment of $30-million each last year to start the edX effort.
Legal documents, obtained by The Chronicle from edX, shed some light on how edX plans to make money and compensate its university partners.
According to Mr. Agarwal, edX offers its university affiliates a choice of two partnership models. Both models give universities the opportunity to make money from their edX MOOCs—but only after edX gets paid.
The first, called the "university self-service model," essentially allows a participating university to use edX's platform as a free learning-management system for a course on the condition that part of any revenue generated by the course flow to edX.
The courses developed under that model will be created by "individual faculty members without course-production assistance from edX," and will be branded separately in the edX catalog as "edge" courses until they pass a quality-review process, according to a standard agreement provided to The Chronicle by edX.
Once a self-service course goes live on the edX Web site, edX will collect the first $50,000 generated by the course, or $10,000 for each recurring course. The organization and the university partner will each get 50 percent of all revenue beyond that threshold.
The second model, called the "edX-supported model," casts the organization in the role of consultant and design partner, offering "production assistance" to universities for their MOOCs. The organization charges a base rate of $250,000 for each new course, plus $50,000 for each time a course is offered for an additional term, according to the standard agreement.

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