A web generation, and the marginal cost of publication has fallen to nearly zero

Martin Weller has got a bit irked by someone likening open access journals to stealing bread, and makes the obvious-to-us points:

Open access is not like stealing bread from Tesco for two VERY SIMPLE reasons:

i) If I take a loaf bread from Tesco then it is no longer there. If I read an online article it is still there for everyone else. We knew this back in 1998 when we talked about non-rivalrous goods. Can we stop using this misguided analogy now? Pleeeease?

ii) You could make the argument that each download of pirated music equals a sale lost (although that is a flawed argument I think). So maybe the argument has some validity for products you want to sell (big maybe for me). But for journal articles it really has no validity – the whole point of research publications is that you want as many people to read it as possible.

I agree, although there’s some interesting stuff buried in point (ii): for academics, researchers and the General Public Good, the whole point of research publications is for as many people to read it as possible – or more precisely, for everyone to whom it is relevant to read it. But for a for-profit company, the whole point of any activity is to make money for the shareholders. The happy part of the history of capitalism is that generally, the most sustainable way of making money for shareholders is to do things that people value. Without getting too far in to the whole critique-of-capitalism argument, if restricting access makes more money for a commercial publisher, then the company has a legal duty to do that. The interests of academics, researchers, the General Public Good and those of commercial publishers were very happily aligned – or at least, very usefully overlapping – for perhaps a couple of hundred years. I think that this is ceasing to be the case, now that the marginal cost of publication has fallen to nearly zero.

That last bit warrants a little unpacking: the marginal cost of publication has fallen to nearly zero. The marginal cost of publication is the cost to produce one additional copy. That’s not the same as the average cost, or the cost of producing the first copy. And the cost has fallen to nearly zero – not actually zero. There is a difference, and it can be a very important one in some circumstances.

The difference between “the cost of publication is zero” and “the marginal cost of publication is nearly zero” can sometimes be negligible – but sometimes it can be profound. And, of course, the price and who pays it is another matter altogether, or at least can be. This deserves further exposition in the context of scholarly publishing, but this margin of my time is too small to contain it.

Anyway.  Martin concludes:

“It’s not as if digital content is new now is it?”

Indeed not. I was just thinking that this morning. I think of myself as working on new technology in teaching, and when I came to the OU (1998) you could use “web-based teaching” fairly interchangeably with “new technology in teaching”. It’s largely the web which has driven the marginal cost of publication down to nearly zero, and the changes were well afoot even then.

But the web isn’t really very new these days. The web got going in April 1993, when CERN said the WWW would be free to use and Mosaic was released. People born then are sitting their AS levels right now, and hoping to go to university next year.

I like to use 1993 as the start date for the web because (a) it’s when it started to catch on, and (b) it’s when I heard about it, which is obviously a key moment in any technology’s lifecycle (!). (As I like to point out before issuing any technological prognostications, my verdict at that point was that it was rubbish and would never catch on. I have since changed my mind.)

If you want to be purist, it’s even more stark. You could date the birth of the web to when Sir Tim had the first complete set of web tools working (browser, editor, server, pages): Christmas 1990. People born then are going to graduation ceremonies right now.

It’s easy to overstate and oversimplify the case for a Net Generation – as my colleague Chris Jones and his team will tell you. But I don’t think it’s going too far to say that it’s hard to call a technology entirely new if it’s been around for a generation.

On the costs of HE

As I mentioned in my last post, the Government has just created first for-profit university college in the UK. But is this a runner as a business model?

It might seem an odd question to even ask: surely BPP wouldn’t be doing it if they couldn’t make money? But my experience in the dot-com bubble suggests it’s worth a quick look. Back then, it seemed to me that there were an awful lot of businesses being set up that couldn’t possibly make money. At the time I thought that they obviously knew better than me, since they were serious business people with real, serious quantities of money at stake. Shortly after, of course, it became clear that they didn’t know any better, and it was then obvious to everyone that an awful lot of companies had been set up that couldn’t possibly make money.

This all comes with a big health warning: I’m not an economist, this is not my main area of expertise, it’s done in terrible haste in broad-brush oversimplifying terms.

(And, I should add, even when I can get such sums correct, my business acumen is not perfect. Last week  someone (jokingly) suggested I set up as a Bicycling Barista, bringing rapid-delivery top-quality espresso to the local community using sustainable transport: phone me up, get me round to your door in minutes with my portable espresso maker to make you a perfect cup. I did some quick sums and proved to myself that it couldn’t possibly make money. Other food delivery services need an order of least £10-£20 to make it worth turning up at your door. People will pay about £1.50 for a cup of espresso. Even if they’ll pay double for at-the-door service, and I also sold cakes at high markups, it’s not a goer as a business. Two days after thus satisfying myself that it couldn’t work, I met a guy who has a Transit van with a full espresso machine in the back, who’s making a living that way. His model is different: he goes to busy places – including events – parks up, opens the back door, sticks up a sign, and sells the full range of espresso-based coffees to lots of people in one go.)

Ok. Caveats aside, how much does a degree cost at retail?

Well, current UK tuition fees are capped at £3,290 per year, which is just short of £10,000 for a three-year degree. That’s a lower bound for the cost.

But – as is widely reported – that is a huge underestimate. This gap is met mostly from the funding bodies (HEFCE, HEFCW, SHEFC and DELNI) grants, but many universities are operating at an annual deficit, some serious, and there is considerable pressure to raise the tuition fees cap, perhaps substantially. HESA finance statistics for the whole sector give a breakdown of income as 34.8% grants, 28.7% fees, 16.3% research, 19% other, and 1.4% endowments and investments. (I’ve no idea what the ‘other’ income is and whether it contributes to the cost of students – it pretty significant.) This suggests that grants are worth about 20% more than fees, which is about another £4,000 per year, giving a grand total of £7,300 per year or £22,000 for a three-year degree.

Fees for foreign students are not capped, and they pay significantly higher fees – to take one example, the University of York charges Overseas students £11,300 or £14,850 a year. That works out at about £34,000 to £45,000 for a three-year degree. This is probably an upper bound: famously, foreign students provide a significant subsidy to UK students.

What about different models, like the OU?

Our students study part time, at a distance, with a hybrid/blended tuition model – some modules have face to face tutorials and print materials, some are entirely online, and we’re moving in the online direction. Our costs are quite different to traditional universities: we don’t have to maintain the campuses and student facilities that other universities do, and we work on an at-scale basis for most of our courses: they cost a lot to produce, but we defray that cost over many students – up to tens of thousands on one course. Most students study part time while employed, or with significant care responsibilities (children, others), and take at least six years to complete a degree.

So what does the OU cost?

The OU’s What can you expect to pay? page reckons the fees are about £4,560 for a UK student for a BSc(Hons) in Psychology, based on 2008 prices – rounded up to £4,600 that’s still considerably cheaper to the customer than £10,000 for a traditional university.  But, of course, that’s only the tuition fees.

The OU’s financial statement for the year to 31 July 2009 gives headline income figures of £233.7m from funding bodies and £141.6m from tuition fees , giving a total of £375m. (Lumping tuition fees paid by employers – including many public sector employers like the NHS and Social Services Depts – and entirely ignoring research, investment/endowment and other income, a total of about £45m.) . We taught 251,639 students that year, or 78,110 full-time equivalents (FTEs). That gives £4,800 in total per FTE year, made up of £1800 in tuition fees and £3,000 from funding bodies. We made a modest surplus of £9.6m, the equivalent of £100 per FTE per year.  Multiplying by 3 to give an entire degree cost gives us £14,400 in total, made up of £5,400 in fees and £9,000 from the state.

(Note that this is an average over all of the OU’s provision, which includes significant postgraduate provision, and a small number of non-UK students who pay premium rates.)

So, to sum up, the current cost of a whole three-year undergraduate degree is probably somewhere between £22,000 and £45,000 at a conventional university, or around £14,400 at the OU. Students pay £10,000 of that themselves at a conventional university, or £4,600 to £5,400 at the OU.

What’s the private sector doing?

Well, the University of Buckingham charges £17,880 in fees for a 9-term two-year undergraduate degree starting in September 2010, or £29,520 for international students. That’s below the cost of conventional universities, but above the OU, which makes sense: one would expect that they might work out cheaper to provide than the conventional sector, particularly with the two-year model. It’s still in business after nearly 40 years, so it isn’t hopelessly unsustainable, although according to HESA it did have a 2.5% deficit in 2008/9 (income £12.0m, expenditure £12.3m, deficit £300k).

What about BPP?

It’s currently charging £9,675 to UK students for a BSc Business Management or BSc Professional Accounting. It charges £19,500 for international students.

That’s considerably less than Buckingham, substantially lower than conventional universities  – like about half the cost, and lower even than the OU. They have cherry-picked, of course, which is presumably how they manage it. And they have no research to subsidise. Interestingly, they offer fully flexible tuition modes: students can study face to face or online, synchronous or asynchronous – with the students choosing.  My guess is that with careful choice of subjects, and building from scratch for price, this is doable. Especially if they can keep the proportion of international students high.

Back of an envelope conclusion: it’s a potential goer. It’s a great time to start such a business: public sector under huge pressure, HE is traditionally a safe haven in economically straitened times, and there’s as friendly a Government as one could hope for. And a recession is famously a good time to start a business.

Only question is whether people will turn up and pay. I suspect they will, in considerable numbers – something like 170,000 people will want a university place this Autumn and won’t get one, and that shortfall will increase over time. Obviously not all of them will be willing or able to pay these levels of fees, but many will, and a lot of money will be made.

This work by Doug Clow is copyright but licenced under a Creative Commons BY Licence.
No further permission needed to reuse or remix (with attribution), but it’s nice to be notified if you do use it.

Here comes the private HE sector?

Potentially huge news this morning: the Government has granted a private sector enterprise – BPP – the right to call itself a university college, as the BBC reports:

The UK’s first new private sector university college for more than 30 years is being announced by the universities minister.

David Willetts will allow London-based BPP, which has 14 regional branches, to become a university college.

The new college, which offers law and business degrees, wants to expand into health and teaching degrees.

BPP College of Professional Studies was granted degree-awarding powers in 2007. It was owned by BPP Holdings plc, which was acquired by Apollo Global, Inc in July 2009 for $607m. Apollo Global is part of the same group that owns the University of Phoenix – the largest and possibly the most controversial private for-profit university in the USA.

I think this is even more significant than the press is making out. “First new private sector university college for more than 30 years” is true, but misleading. So far as I know, this is the first time ever in the UK that a private, for-profit company has been given the title of university college. And few will doubt that the full ‘university’ title will follow.

The only other private university in the UK is the University of Buckingham, founded 30 years ago. You could also count the College of Law, which doesn’t get direct state subsidy and now has its own degree-awarding powers. It’s worth noting that the University of Buckingham and the College of Law are both not-for-profit charities, not companies. Buckingham is has a Royal Charter and Statutes and everything, it just doesn’t get any money (directly) from the Government.

As you’d imagine, this development is not wholly welcome. The BBC quotes Sally Hunt, General Secretary of UCU, the university teachers’ union:

“Today’s news could mark the beginning of a slippery slope for academic provision in this country,” she said.

“Encouraging the growth of private providers and making it easier for them to call themselves universities would be a disaster for the UK’s academic reputation. It would also represent a huge threat to academic freedom and standards.”

“Private providers are not accountable to the public and do not deserve to be put in the same league as our universities”

I suspect that whether you want them or not, there will be a substantial expansion of private provision of higher education in the UK. The public sector is facing huge, huge cuts across the board, and HE is emphatically included. This is on top of a long-running funding crisis, with many universities in perilous financial straits already. The capacity to supply degrees is clearly going to fall far short of the demand this Autumn. It’d be very, very surprising if this new Government were not to welcome any offer from the private sector to fill the gap with open arms. One might hope that the whole situation will not get anywhere near as bloody as that artlessly mixed metaphor might suggest.

In my next post, I’m going to do some back-of-the-envelope sums on whether providing HE is a runner as a business model.

OU Library systems: meeting needs of 21st century learners

Liveblog notes from an IET Technology Coffee Morning on 21 July 2010. Hassan Sheikh and Owen Smith from the OU Library present.

Why does the Library need to have systems management? Because it has a lot of systems: some legacy, some newer.

(cc) jurvetson on Flickr

The users are key, especially the students – they use the systems to access e-resources. But also course teams, ALs who do that and come in to the physical library.

Key systems they’re working on at the moment:

  • vertical search
  • Library Management System
  • Library website (migration to Drupal from Knowledge Network, Web 2.0, mobiles, web services/feeds, personalisation)
  • integration with other systems (finance, DRM)
  • ORO (ePrints)
  • Linked data and reference management (TELSTAR and LUCERO projects)
  • authentication (SAMS, Shibboleth, EZ Proxy)
  • eBook readers.

Continue reading “OU Library systems: meeting needs of 21st century learners”

Plus c’est la même chose?

Just how much of a disruption are Universities facing?

A conversation at the end of Scott Leslie‘s talk just now has challenged my view a bit. Scott had given a great demonstration of and argument for an open approach, and someone (I didn’t spot who) raised the point that this model might not work for everyone:

If you’re a young academic mindful of publication record, competitive environment, you might not want to distribute your ideas really widely, that’s your capital.

Scott came back with:

This is the major argument in academia. Wow. The only place in the universe where your value is increased by being more obscure. Every cultural/content industry is going through this transformation. Music is interesting where it hit early on. Efforts to create false economies of scarcity where you control flow of ideas are rearguard actions that are bound to fail. Ubiquitous access to knowledge is not a small disruption. This is of a large order.

The rest of the exchange was interesting too (scroll down to the bottom of my notes)

In my field, there are plenty of people who embody an open/online approach – Scott of course is one, but there are loads of others – your David Wiley, Stephen Downes, and closer to home your Martin Weller, Tony Hirst, Gráinne Conole – and in this online blogging/tweeting/mashing up world, they’re the stars, the ones who really count. But in the world of journal articles and the sort of research that gets counted by the RAE and REF, it’s a different set of people. The big names are, by and large, not online in any open way beyond the now-standard web page with lists of publications in peer-reviewed journals and invited keynote speeches. Indeed, getting the slides from those keynotes is unusual (depending on the conference).

To caricature grossly, there seems to be two separate groups of online academics. Firstly, there’s people who already have a full professorship/tenure, and took up blogging after that. Secondly, there’s people who are doing lots of online stuff but who – in the immortal words of an old staff rewards document “have not yet met the criteria for promotion”, which are based around traditional measures of excellence in research (and teaching if you’re lucky). And there are far more people in the second category.

This may be changing, slowly – the OU in particular is changing promotion criteria to explicitly allow this sort of work to be recognised and rewarded, led by a strand in Martin’s Digital Scholarship work. But the entire structure of a university is to be a community of scholars, and what counts as excellent scholarship is what scholars treat as excellent scholarship. And for now, overwhelmingly scholars don’t treat blogs (and other online activity) as excellent scholarship.

As I was fond of saying when I was a manager, if you’re choosing what to do as an academic, it’s almost never a mistake to produce more peer-reviewed articles in high-quality journals and get more research funding. Of course one can argue that working in the open can help you do that – and I’d probably agree on balance – but there are serious tensions, not least of time.

To return to my main point – just how big a change will universities see? Will it be as big as the change that’s started in the music world and has yet to resolve?

I still think not. Universities have been around in recognisable shape for quite some time. As John Naughton likes to point out, the only Western institution that has lasted substantially longer than Cambridge University is the Catholic Church. That’s quite a record of persistence. On the other hand, I skimread Lucky Jim the other day, and although there are many recognisable components, the academic world portrayed there seems profoundly different to the one that John and I inhabit now. So it’d be rather ahistorical to suppose that the next half-century or so will not see at least as profound change. And there are plenty of drivers for change beyond the informational transformation wrought by new technologies – not least of which is an increasing demand for a a formal university education.

It’s almost as if the explosion of access to information is making educators more, not less important. Who could’ve predicted that in 1994? Er, well, nearly everybody who was talking about education and the WWW (as we called it back then), apart from a handful of real iconoclasts.

I do think there will be a huge growth in activity round the edges of what we currently think of as universities. This is already happening – Wikipedia, P2PU, the Connectivism/CCK courses, increasing private sector activity. What a university does is being disaggregated and reinvented left, right and centre. There are opportunities to make lots of money here, but also huge opportunities to do socially-valuable and cool things without costing much.

Scott made this call to action:

Let’s transform universities – if we don’t actively engage with these forces they will disrupt us and wash us away.

I’m not sure I buy a serious risk of universities being washed away. But I do wholeheartedly support a call to transform universities by engaging with the forces of openness and near-ubiquity of access to knowledge. The potential for improving students’ experience of learning is huge.

So I think we can change Universities and make them much better. But how fundamental a change will it be?

Scott Leslie: Open Educator as DJ

Liveblog notes from Scott Leslie‘s IET Technology Coffee Morning on “The Open Educator as DJ: Towards a Practice of Network Performance”, on 14 July 2010 in the Jennie Lee Labs.

Scott is from British Columbia, and is currently a Visiting Fellow with the OLnet project.

(cc) deejayres on Flickr

His Prezi slides, notes and links are all available online.


Continue reading “Scott Leslie: Open Educator as DJ”