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Netflix Original Content and For-Profit Superstar Faculty
May 23, 2012 - 10:04pm

Over the next 5 years Netflix plans to spend about $185 million on the creation of original programming. The first show, Lilyhammer, has been launched - and 4 more are in the pipeline for this year. They are: House of Cards, Hemlock Grove, Orange Is the New Black, and a reboot of Arrested Development. Subscribers will be able to stream the whole season at anytime, bypassing the traditional episode-by-episode release schedule.   

Will for-profit higher ed follow the Netflix path? 

Will for-profit providers such as Capella, Kaplan, DeVry, Strayer and U of Phoenix decide to invest in hiring a few superstar faculty members? 

Will for-profits poach faculty members from non-profits, people who have public profile, who get quoted in the press, write opinion pieces, and author books and articles aimed at nonspecialists?

Netflix's move into original programming is really a bet on a few superstar producers, directors and actors. House of Cards is created and produced by David Fincher (Oscar nominated director of The Social Network), and stars Kevin Spacey.  Hemlock Grove stars Famke Janssen of X-Files Fame. Orange is the New Black is a creation of Jenji Kohan, who also created Weeds for Showtime. Arrested Development comes with a built in fan base and well known stars such as Jason Bateman.

In developing original programming around known talent Netflix is hoping to drive new digital subscribers and increase retention of existing customers.   While original programming will make up a tiny percentage of the video Netflix streams, the hope is that the existence of a few "must watch" shows will mimic the business and revenue success that HBO and Showtime have achieved with their original programming. Netflix will continue to spend most of its content money, some $3.7 billion through 2017, licensing content from other creators. But a business built solely around licensing other people's content puts Netflix at risk from competitors (such as Amazon's streaming service), and in a poor negotiating position with studios and networks to secure licensing deals.

For-profit higher ed providers have so far built their businesses around convenience, new delivery models, efficiencies in course delivery, and marketing.They have not built their businesses around superstar faculty.  In fact, the for-profit model is explicitly anti superstar faculty, as the business model depends on standardization of delivery and driving down costs for delivery. For-profit courses tend to be designed by subject matter experts and learning designers, and then facilitated by instructors. This practice ensures greater uniformity across instructors and opportunities for continuous improvements in the course design. This model also scales well, as the marginal cost for each additional course drops as new sections are added.

The downside of the for-profit strategy to gain efficiency and great productivity is that everyone else can mimic these practices. Every for-profit institution can work to bring down the costs per student while improving outcomes, primarily outcomes related to retention. More and more marketing dollars must be spent to differentiate one for-profit provider from the next.  

Superstar faculty, however, are a scarce good. Relatively small investments in a limited number of superstar faculty will provide a branding boost that is disproportionately large compared to the dollars spent to recruit these superstars. Just as creating a few original shows each year does not fundamentally alter Netflix's business model (content licensing and distribution through ever improving digital platforms), a few superstar faculty hires will not alter the core business models of the for-profits.  

A tiny number of classes will be taught by the superstars, but these classes will create a halo effect around the rest of the business.

The past few months have not been particularly good financially for for-profit providers, with revenues, enrollments, and profits slipping in the face of declining enrollments and increased regulatory scrutiny. It may be time to try something new.

What will it take for the for-profits to recruit the public intellectuals and faculty superstars?  

Which for-profit will be the first to make this move?  



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