Shocking, But Not Shocking

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Just under three months ago Pearson, one of the “Big Four” of in the Online Program Management (OPM) space, announced the sale of its OPM business. Today, another of the four is also getting out of the business (the others are Wiley, 2U/edX, and Academic Partnerships).

Wiley announced with its Q4 2023 earnings release that it is divesting several business units, including Wiley University Services.

Why the Sale?

The immediate issue from an OPM perspective is that Wiley University Services has been losing revenue with no signs of returning to growth.

Wiley reported full year revenue of $208 million, with an 8% reduction from the prior year. Just three years ago, Wiley reported $232 million in OPM revenue, with an organic growth of 11% compared to the prior year plus the acquisition of Learning House to give an overall growth of 36%.

Looking back further, in 2012 Wiley acquired Deltak to form the basis of its OPM business, paying $291 million for the company that made $71 million in annual revenue (both in 2023 dollars).

While Wiley’s OPM business has been in decline, it has not lost its highest profile customers as Pearson had (ASU and Ohio University, with the latter ironically moving to Wiley).

Put simply, the Wiley University Services OPM business is no longer a growth business and is shrinking.

Other Drivers

Add to this situation the regulatory and public relationship campaign being waged against OPM providers that rely on revenue sharing. Wiley offers both rev share and fee-for-service, although the majority of clients choose rev share.

Underlying much of this environment is the continuing enrollment declines in US higher education, which recently even includes online education. Meanwhile there are more and more online academic programs leading to a crowded market. Flat or anemic demand with a significant supply growth.

From a financial perspective, the end of free money also played a major role, with the rise of inflation. Most technology business that used to be judged primarily on growth are now judged primarily on profitability, with growth needing to be evident in the short to medium term. There is little remaining belief in long-term stories, as investor sentiment has reversed course in the past two years. Recently I shared the impact of many of these same trends on the public markets for EdTech companies. Wiley is taking a big step today to try and reverse this trend through focus.

Put these all together, and you have a business unit losing revenue with an increasingly difficult (and expensive) regulatory environment, where the primary market of US higher education is itself losing enrollments and revenue, while investors are suddenly demanding a return to business fundamentals. Today’s news was shocking in its implications for both Wiley and the OPM market, but looking at the drivers the decision is not shocking.

Stay Tuned

We’ll need to watch and see which company acquires Wiley, but this sale - along with Pearson’s - marks a significant change in the OPM market. Two of the largest four vendors are exiting the market. Yes, the new owners will still be OPM providers, but the market is changing.

It will also be interesting to see how these two sales impact recent / existing OPM clients of Pearson and Wiley.

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