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The Revenue Share Model in Online Education

Recently there’s been a drastic increase in traditional, regionally accredited, non-profit institutions venturing into online higher education in order to diversify their tuition revenue. Many schools, especially those located in the Northeast and Midwest, are entering the online education space to compensate for the anticipated decline in high school graduates over the next several years. Others are doing so to respond to student demand for quality, convenience and advanced educational opportunities.

However, for institutions already struggling financially and with limited human, technical, and financial resources, starting an online program can seem like a daunting task. Consequently, many of these schools are gravitating toward higher education service organizations that operate on a revenue share model.

This post examines the pros and cons of the revenue share model and explores viable alternatives for institutions that are focused on providing a sustainable online education solution and increasing revenue.

The Upside of the Revenue Share Model

Companies that offer the revenue share model can be attractive for many reasons. Senior leadership, faculty, and administrators are often overwhelmed by growing responsibilities, dwindling resources, and competing priorities. As a result, the revenue share model is attractive because of:

Low Capital Investment. Revenue share partners take the primary financial risk in launching online educational solutions for schools. Schools are drawn to their services due to the low capital investment and convenience.

Broad Resources. Revenue share companies offer a one-stop shop for universities. Companies with a suite of services in marketing, recruitment, and student services for online learners can be attractive.

Technological Expertise. Planning, designing, and launching online higher education programs can be technically intimidating. Revenue share partners bring a host of technological services and know-how to their relationships with schools.

The Downside of the Revenue Share Model

But for non-profit universities, the rush to enter the online education space should to be tempered with strategy and long-term planning. Many revenue-share executives were born and bred in the for-profit world and the companies they work for often trade quick results for less-than-optimal contract conditions. Though each service provider is different, here are three of the most common issues universities have with revenue-share companies:

Fees and Costs. The share of revenue some companies demand can range from 40 – 70 percent. For non-profit universities that enter the online space to remain competitive and tap into the benefits of larger markets, those figures may not make good business sense. With competition only expected to grow, long-term commitments for less than 50 percent of the revenue may not be that attractive.

Contract Terms. Revenue share companies often try to lock schools into contracts that can range anywhere from 3 years to 10 years. In the fast-paced and ever-changing landscape of online education, these time frames can be an eternity and work against the goals of a nimble, flexible, and responsive learning solution.

Policy Intrusion. Since they have such a vested interest in revenue, some revenue-share companies may try to influence admissions or other academic policies to ensure the greatest number of students are accepted and active. This pushing of the policy envelope can undermine student success and jeopardize the very reputations that schools are trying to protect and market.

Restrictive contract terms coupled with an approach that’s less collaborative and more “one size fits all” leaves some traditional non-profit universities feeling stifled by their first ventures into online education. For schools still exploring their options, there may be a better way.

Partnering With an Online Enrollment Management Consulting Firm

The flip side of the revenue-share model and the companies that supply it are online enrollment management consultants who show universities how to enter the online education space tactically. The differences between the two are stark. We liken it to giving a person a fish (rev-share companies) and teaching a person to fish (consulting firms).

Responsible consulting organizations work with schools to identify the programs and target the students that will benefit them most in the short-term and longer-term. The online solutions we help clients create are scalable, sustainable, and state-of-the-art — without revenue splits, onerous contract terms, or invasive policy-tinkering. For universities that are focused on strategic growth and want to create an enduring online solution that complements traditional learning options instead of being a quick add-on, a trusted online enrollment management consultant is the answer.

At Enrollment Builders our goal is institutional student success, not company profits. The online education solutions we help our clients create are driven by the understanding that student success is a prerequisite to a school’s success, and a measure of our own. We partner with colleges and universities to create online education programs that are informed by industry knowledge, built through best practices, and always focused on outcomes.

To learn more about how Enrollment Builders can help build your online enrollment solution, give us a call at 513-518-7824, or request information here.