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John Katzman is the founder and CEO of Noodle. His bio reads, “John has founded and run three education companies: the Princeton Review, 2U and now Noodle; in each, he's brought together incredible people and helped them create transformative services and compelling cultures. He sits on the boards of the Woodrow Wilson Foundation, the National Association of Independent Schools and the National Alliance for Public Charter Schools.”
John graciously agreed to answer my questions about his view of the online program management (OPM) industry.
What questions do you have for John?
Q: In December of 2016, you wrote, "In three years, no one will be able to explain why it was that colleges and universities continued to hand more than half of their tuition to companies marketing and supporting their online programs -- the online program managers. It will be even more challenging to explain why some agreed to contractually share their tuition for the next 10 or 15 years."
Care to expand?
A: Sure. Ten years ago, it cost $15 million to $20 million to launch and scale a good online program, and there was a lot of risk; could a great school build a program as good as its on-campus program, and would anyone take it? Now it’s $2.5 million to launch and scale a program, and there’s no risk -- 30 percent of grad students now study online.
Noodle presents universities with a far less expensive, more flexible and transparent model, and we now work with a dozen great universities, including NYU, BC, Claremont, U Tennessee, Wake Forest and Tulane. By the end of this year, that will be two dozen. As we prove ourselves, any CFO who allows a dean to wildly overpay for online services should and will be risking his or her job.
Q: In talking to other OPM players, it seems as if they are moving away from standard revenue-sharing models and toward unbundling. They are offering a range of options, from lower revenue shares for discrete parts of a partnership (such as handling marketing) to a fee-for-service model. Do you see a similar movement? Where will that leave Noodle?
A: Yes, but unbundling isn’t exactly what we’re doing. A program needs instructional design, marketing, recruiting, funding, technology and support services; we’re just comfortable with helping a school build capacity rather than use outside providers exclusively. Any way our competitors follow us, though, they will leave Noodle as the leader in the next-generation OPM space.
Q: One of the challenges of a fee-for-service OPM model is that this still requires an up-front investment by schools. Yes, having the OPM front the funds is expensive capital. But it is also one of the only ways that many schools can get online programs off the ground. What do you say to schools that don't like to give up half or more of their revenues, don't like long-term contract lock-ins, but yet still don't have the ability or will to make a financial investment in online programs?
A: Some traditional OPMs are trying to position us as fee for service, but Noodle also offers a temporary revenue-share option in which we fund a program and take on all risk. The school pays a share of revenue, but only until we have recouped our out-of-pocket expenses for its programs, after which it pays for actual services. This is the best of both worlds, and about half our schools take advantage of it.
Q: I've written that OPM companies need to start thinking like an industry. That there is a need for online program management leaders to come together to think about branding and communications. That ultimately the companies are acting in a self-defeating way to go after the same business -- as opposed to expanding the market by getting better aligned with the needs and culture of higher education. Can you imagine the OPM industry coming together to create your own association? What might that look like?
A: My job is to decimate the OPM industry, which is driving up higher ed tuition. So … perhaps, but doubt they’d want me in it.
Q: There is a lack of good data on the OPM industry and its higher education partnerships. There is no independent clearinghouse where schools can find examples of contracts, or even anonymized financial and outcomes data. This inability to make data-informed decisions makes it more difficult for schools to work with a partner. This is one challenge that I think an OPM association could tackle. What do you think? How do you think schools should be making decisions about online program management partnerships based on data?
A: We are lobbying for increased transparency in Congress and the Department of Education. Where are OPMs actually spending the money they charge schools? Tough environment for transparency or any restrictions on companies, but some people on both sides of the aisle get it.
