Paul L. Caron
Dean



Thursday, October 15, 2020

Beware the Instant Global-Campus Movement: Universities Should Stop Trying To Buy Their Way To Online Dominance

Arizona Purdue

Chronicle of Higher Education, Beware the Instant Global-Campus Movement: Universities Should Stop Trying to Buy Their Way to Online Dominance:

The University of Arizona took a big step into the online-education market this summer when it announced plans to buy Ashford University, a for-profit institution with more than 30,000 students, to create a new Global Campus. Recast as a nonprofit, the online university will still operate as a separate entity, but now it will carry the University of Arizona name. Arizona is following in the high-profile footsteps of Purdue University, which in 2017 announced plans to purchase the similarly large for-profit Kaplan University.

Both Arizona and Purdue, with one move, have outwardly leapfrogged their competition and became major players in the online world with a much more diverse set of learners — working adults from underserved demographic groups. So it’s not hard to see why other universities are looking to follow their leads. When Purdue University Global was being approved by accreditors in 2018, there were already a dozen other nonprofit colleges exploring potential acquisitions of existing for-profit online universities. This appears to be an emerging, problematic trend. Call it the Instant Global Campus movement. ...

As for the universities, they get a ready-made online campus. Leaders of the institutions argue that it would take years to build up similarly robust online operations and that the acquisitions are a sensible shortcut. But that “buy versus build” argument is flawed. These new entities don’t help the parent university better serve students, including working adults, who will now provide significant revenue for the parent university. ...

[I]t is doubtful that these global-campus deals will pay off in the way they are being touted in press releases. Arizona has said that they expect to bring in $25 million annually from the deal, but Ashford hasn’t been that profitable since 2013, when there was significantly less competition in the online space.

The biggest problem with these deals, however, isn’t that they are likely to fail. It’s that there’s a chance they’ll succeed. What happens if Purdue University Global grows enrollment and makes enough operating income to fund the 12.5-percent revenue-sharing payments to Kaplan Higher Education and pay the guaranteed tens of millions of dollars to Purdue? What happens if the University of Arizona Global Campus generates $25 million per year in profit for the University of Arizona and 19.5 percent for Zovio — above and beyond the costs of operations?

In those cases, we would see prestigious nonprofit universities charging much more in tuition than they spend on operations. The Instant Global Campus would be a cash cow, transferring tuition dollars out of the online schools and into the bank accounts of nonprofit research universities.

 

https://taxprof.typepad.com/taxprof_blog/2020/10/beware-the-instant-global-campus-movement-universities-should-stop-trying-to-buy-their-way-to-online.html

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