I gave a talk on the Higher Education market at the SIIA Ed Tech Business Forum in San Francisco a few weeks ago. Here is a summary of the talk.
College Enrollment Trend
As you can see, enrollments are expected to be flat for the next eight years.
While you could say that this does not bode well for anyone looking to sell into higher education, that's actually far from the truth. Below, we'll go through some of the market niches that are, in fact, growing.
Growth in Online Courses
Over 4.6 million students were taking at least one online course during the Fall 2008 term. This is a 17 percent increase over the number reported from the previous year, and far exceeds the 1.2 percent growth of the overall higher education student population.
More than one in four higher education students now take at least one course online.
Growth in For-Profit Enrollments
The for-profit market is growing at 12.5% a year. Currently, they are under a 10% market share, but they were under a 3% market share at the beginning of the millennium.
The for-profits have capitalized on three trends: the ability to provide federally backed student loans, their ability to adapt to job-related education, and the adoption of online courses.
Growth in Minorities
While there has been an increase in White students, there have been huge increases in minority students. The compound annual enrollment growth rates of different races are shown below:
The increasing numbers of minority students provides opportunities to target services specifically for their needs. Below shows the total enrollments for the different groups.
While many think in terms of publishing content for students (which, in higher education, the students are the ones who actually purchase), there are opportunities selling directly to schools, both in academic and administrative products and services. Below is the breakdown of academic spending in 2009.
Changes in the way content is sold
Historically, textbooks have been sold to students through
the campus bookstore, on recommendations or requirements of the professor. the student would purchase the book from the book store, or perhaps buy a used book, as
With this increasing use of the Internet, online materials, new devices, and e-books, the distribution channels have become more confused:
Education publishers still go to professors, but they can select from an ever-increasing universe of free materials, and students can choose from a plethora of sources. Look for continued channel confusion, disaggregation, and disintermediation until the channel finally gets sorted out, sometime in the next ten years.
Textbook market concentration
Of a total market of about $4 billion, the top three education publishers, Pearson, Cengage, and McGraw-Hill, control about 75% of the market.
Their national sales forces give them the ability to reach US college or university faculty in any state and of any size institution. On the other hand, the additional pressure of institutions to reduce the costs of textbooks, the availability of free materials, and the flexibility of smaller competitors to create targeted content, does not guarantee that this situation will continue indefinitely.
Where are the opportunities
Following, from our vantage point, is a summary of five big opportunities:
- Remediation: over 85% of community college students cannot do college level math, and over half cannot do college level reading and writing. In total, over half of all entering higher education students need remediation.
- Dropout prevention: since the 1950's, about half of all college entrants do not graduate; this is a prime goal of the Obama administration.
- Online: the use of online courses and online materials are far outstripping the growth in enrollments
- For-profits: the for-profit institutions have been able to move quickly to meet market needs, and with cutbacks in state funding, their growth may continue.
- Community Colleges: this is the cheapest way to get a degree and to spend the first two years of college. With a dismal job market, they are more in demand than ever. But, with state spending cuts, they are in distress. They have a huge need to meet the demands of more students at a lower cost.