Additional Points on 2U’s Acquisition of edX
2U completed its acquisition of edX yesterday and released some additional news worth sharing.
Beyond completing the deal, there are several clarifications and news that came out yesterday (several quotes below come from Doug Lederman’s Inside Higher Ed coverage, which I recommend reading in full).
Anant Agarwal will remain with the company in a new position of Chief Open Education Officer, reporting to the CEO.
2U and edX succeeded in retaining all 160 edX institutional partners, and “27 of 2U’s roughly 80 partners have agreed to join the edX consortium and offer free open courses for the first time.”
At least one edX partner (Boston University) is creating a new low-cost degree program based on both edX’s and 2U’s support.
edX will become the primary brand, and 2U is investing millions to boost the brand.
All membership and annual fees for edX partners are being eliminated.
Personal vs. Institutional View
Lederman devotes a significant portion of the IHE article discussing “the path to a stunning deal” while focusing on the sense of betrayal that many individuals felt based on the news of a nonprofit organization – one many of them had contributed to – sold for $800 million. “I, for one, feel an acute sense of loss, frustration and, yes, disappointment,” and “I’m extremely disappointed with this development,” and the like. Michael Feldstein wrote a post in September elaborating on this frustration, particularly focusing it on Harvard’s and MIT’s role.
And yet . . . no institutions have left the edX program, and we’re already seeing 2U partners joining edX, and one edX partner (Boston University) leveraging 2U resources as well as edX to create a new program.
What I think helps explain this situation is the difference between individual and institutional perspectives. Lederman has a great quote that captures this dynamic:
Individuals still have the same philosophical issues with the deal, but institutions for the most part do not. From an institutional perspective, there is a net positive. edX with a strategy. edX with financial investment and without the dreaded membership fees.
And those fees are nontrivial. Membership for schools joining edX were reportedly as high as $250k – $1 million, although edX was known to waive the fees in certain cases, and annual fees were roughly $50k. For FY2020, “membership dues” accounted for $6.7 million of edX’s $84.7 million total revenue. But from 2U’s financial perspective, $6 – $12 million dollars is a small price to pay for goodwill with institutional partners, as described by IHE.
There will continue to be personal dismay at the deal, but “in the cold light of realism” the institutional perspective prevails.
Change of Identity
While 2U leadership has been very clear with investors and the broader community about the branding aspects of the deal, I don’t think the significance of this change has been widely understood in EdTech markets. CEO Chip Paucek likens the upcoming changes to Alphabet (parent company) and Google (product company), but there is a major difference here. 2U is the company brand, and most customer- and partner-facing branding will be under edX. According to 2U in an email interview, the platform, marketplace and all 3,500 offerings will be under edX at closing, and the company expects that all of 2U’s partner facing programs and services will move under the edX brand as well, over time. Alphabet was never a customer-facing brand, just a new parent company name, but 2U is a brand, a strong one, and it is going away.
This branding is not just a matter of semantics, and the changes coincide with the business model shift towards an Online Education Platform, or as 2U calls it a “free to degree online learning platform.” In that model the platform offers a full spectrum of offerings, from free MOOCs, short courses, professional certificates, bootcamps, sub-degree certificate stacks (think micro-bachelors or micro-masters as popularized by edX), all the way to fully-accredited degrees. Most or all of this spectrum is intended to offer credentials that have some value in the workforce.
I wrote last week about the Wall Street Journal article on the University of Southern California and its online Masters of Social Work program, where tuition was as high as $115,000 per year. 2U as a brand is associated with masters or professional degrees at elite institutions, which means by and large expensive programs. 2U as a company has evolved over time, even offering lower-priced bachelor programs at the London School of Economics and Morehouse College, as well as short courses and bootcamps and certificate programs. But the brand identity is closely tied to its roots more than its current reality. And this comes in a time of heightened scrutiny – both regulatory and in activist media campaigns – of the OPM market, with 2U as the poster child. 2U as a brand is not toxic, but it is a target. The rebranding will serve the purpose of leveraging edX’s global reach and of changing the perception of 2U’s core business and associating it with lower-cost educational offerings. Per IHE:
Boston University’s online Master of Public Health program is schedule to start taking applications in Summer 2022, and the program cost is set at $24,000. That is the same price that BU set on its edX-based online MBA launched two years ago. According to 2U, there will be more news on “disruptively-priced” programs, including master’s, in the next few months.
2U as a company has made significant strategic changes in the past three years, and with the edX deal complete, it will spend a lot of money and effort working to change the market perception of the company. Expect more edX messaging, and lower-cost program news, and more emphasis on the platform model. In an ideal world, the growing discussion around regulation of OPM and related markets will also focus on the direction the market is heading and not on old perceptions.