OPM Market Landscape And Dynamics: Winter 2023-24 Updates

At this point the question is what hasn't changed?

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Last spring I took a mini victory lap based on my predictions of turmoil in the Online Program Management (OPM) market.

During several keynotes, podcast interviews, and panel sessions over the past two years, I have described how the Online Program Management (OPM) market was facing enormous pressures and would change dramatically. I took some heat in private conversations for overstating the case, but as the past 12 months have shown, it turns out that I understated the turmoil and change of the market.

Well it turns out that market changes have accelerated since that time. With that in mind, it is time to update our two main OPM Market graphics.

OPM Market Landscape

In 2023:

  • Market valuations of publicly-traded OPM companies continue to be depressed, with 2U/edX down 98% from March 2021, Keypath down 90%, and Coursera down 55%. Although Coursera has rebounded from its 78% down level in the spring.

  • Pearson completed its sale of its OPM business to private equity firm Regent, with it now branded as Boundless Learning.

  • Wiley announced an agreement to sell its OPM business to competitor Academic Partnerships.

  • Noodle is in the process of redefining itself, essentially leaving the OPM market while providing many of the same services with a revised business model.

  • The US Department of Education (ED) launched two regulatory actions directly aimed at the OPM market - new third-party servicer (TPS) guidance that was subsequently rescinded and planned for re-release in early 2024, and a review of whether to keep or changed the t that underpins tuition revenue-sharing agreements.

  • 2U’s co-founder and long-time CEO Chip Paucek stepped down as the company faces potential bankruptcy (not ceasing to operate, however) due to corporate debt costs and the need to refinance.

  • We broadened our global perspective on the OPM market, with new companies listed as examples.

As always, please note that this view is intended to give a visual overview of the market landscape and is not meant to be comprehensive in terms of vendors represented. This is particularly true in the smaller customer base and fee for service categories.

OPM Market Dynamics

When we first came up with the Mad Max graphic in 2018, it was intended to counter the golly gee, the OPM market is rich, well-funded, and growing like crazy coverage, or the flip side of these companies are all getting rich pulling profits out of the schools coverage that we saw in EdTech and national media through 2022.

This year there are two primary changes with the overall message of the graphic:

  • There are significant financial challenges to the market in terms of costs of borrowing and enrollment difficulties.

  • The small threat from the Department of Education and its allies to the OPM market has become a major threat.

We still get a picture of a chaotic market that is not for the faint of heart, and one that is seeing consolidations and category changes, and these changes will continue. All of this in a Mad Max-style pursuit of college online course and program revenue (whether rev share or fee-for-service or a blend, and whether degree- or certificate-based).

I will add a separate premium post to describe more of the details behind these two images, but for now it’s worth highlighting two macro trends driving the changes.

End of Free Money

I had previously shown the market entering rocky ground due to financial pressures - declining overall enrollments, concerns on inflation and recession, etc. With the new version I am calling out the much broader effect of the End of Free Money, by which I mean the ahistorical but extended period of very low (nearly zero) costs of borrowing that started with the 2008-09 great recession. Free money essentially enabled much of the OPM market’s growth, as companies could afford to borrow and invest in the up-front portions of revenue-sharing contracts when the OPM provider typically lost significant money on each program. The free money era is gone, with rising rates starting in mid 2021, and that changes the calculus for much of the OPM market. Secondarily, it increases the costs of attendance due to student loan interest rates.

Existential Regulatory Prospects

In the Spring 2023 version I highlighted regulatory activist moves against the OPM market, and at this point potential regulatory action (or at least regulatory guidance in the US) could blow up the market by ending revenue-sharing. Yes, the fee-for-service models would avoid some of the changes, that category would also be impacted. While these actions are primarily in the US, many providers are based in the US with that being the most lucrative market. We do not know what changes ED has in store for 2024, but the potential to kill the bundled services exception remains, and ED has indicated it will re-release TPS guidance targeting OPMS in the new several months.

Update 12/15: I had missed (thanks to a reader for the notice) that Extension Engine has rebranded as Studion. The Landscape graphic has been updated.

Update 12/19: Fixed typo in name of InStride.

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