Lesson 11 - Massive Open Online Courses

5.8. Costs and Economies of Scale

One main strength claimed for MOOCs is that they are free to participants. Once again this is more true in principle than in practice, because MOOC providers may charge a range of fees, especially for assessment. Furthermore, although MOOCs may be free for participants, they are not without substantial cost to the provider institutions. Also, there are large differences in the costs of xMOOCs and cMOOCs, the latter being generally much cheaper to develop, although there are still some opportunity or actual costs even for cMOOCs.

The Cost of MOOC Production and Delivery

There is still very little information to date on the actual costs of designing and delivering a MOOC as there are not enough published studies to draw firm conclusions about the costs of MOOCs. However, we do have some data. The University of Ottawa (2013) estimated the cost of developing an xMOOC, based on figures provided to the university by Coursera, and on their own knowledge of the cost of developing online courses for credit, at around $100,000.

Engle (2014) has reported on the actual cost of five MOOCs from the University of British Columbia. There are two important features concerning the UBC MOOCs that do not necessarily apply to other MOOCs. First, the UBC MOOCs used a wide variety of video production methods, from full studio production to desktop recording, so development costs varied considerably, depending on the sophistication of the video production technique. Second, the UBC MOOCs made extensive use of paid academic assistants, who monitored discussions and adapted or changed course materials as a result of student feedback, so there were substantial delivery costs as well.

Appendix B of the UBC report gives a pilot total of $217,657, but this excludes academic assistance or, perhaps the most significant cost, instructor time. Academic assistance came to 25 percent of the overall cost in the first year (excluding the cost of faculty). Working from the video production costs ($95,350) and the proportion of costs (44 percent) devoted to video production in Figure 1 in the report, I estimate the direct cost at $216,700, or approximately $54,000 per MOOC, excluding faculty time and co-ordination support (that is, excluding program administration and overheads), but including academic assistance. However, the range of cost is almost as important. The video production costs for the MOOC which used intensive studio production were more than six times the video production costs of one of the other MOOCs.

The Comparative Costs of Credit-based Online Courses

The main cost factors or variables in credit-based online and distance learning are relatively well understood, from previous research by Rumble (2001) and Hülsmann (2003). Using a similar costing methodology, I tracked and analyzed the cost of an online master’s program at the University of British Columbia over a seven-year period (Bates and Sangrà, 2011). This program used mainly a learning management system as the core technology, with instructors both developing the course and providing online learner support and assessment, assisted where necessary by extra adjunct faculty for handling larger class enrolments.

I found in my analysis of the costs of the UBC program that in 2003, development costs were approximately $20,000 to $25,000 per course. However, over a seven-year period, course development constituted less than 15 percent of the total cost, and occurred mainly in the first year or so of the program. Delivery costs, which included providing online learner support and student assessment, constituted more than a third of the total cost, and of course continued each year the course was offered. Thus, in credit-based online learning, delivery costs tend to be more than double the development costs over the life of a program.

The main difference then between MOOCs, credit-based online teaching and campus-based teaching is that in principle MOOCs eliminate all delivery costs, because MOOCs do not provide learner support or instructor-delivered assessment, although again in practice this is not always true.

Opportunity Costs

There is also clearly a large opportunity cost involved in offering xMOOCs. By definition, the most highly valued faculty are involved in offering MOOCs. In a large research university, such faculty are likely to have, at a maximum, a teaching load of four to six courses a year. Although most instructors volunteer to do MOOCs, their time is limited. Either it means dropping one-credit course for at least one semester, equivalent to 25 percent or more of their teaching load, or xMOOC development and delivery replaces time spent doing research. Furthermore, unlike credit-based courses, which run from anywhere between five to seven years, MOOCs are often offered only once or twice.

Comparing the Cost of MOOCs with Online Credit Courses

However, one looks at it, the cost of xMOOC development, without including the time of the MOOC instructor tends to be almost double the cost of developing an online credit course using a learning management system, because of the use of video in MOOCs. If the cost of the instructor is included, xMOOC production costs come closer to three times that of a similar length online credit course, especially given the extra time faculty tend put in for such a public demonstration of their teaching in a MOOC. xMOOCs could (and some do) use cheaper production methods, such as an LMS instead of video, for content delivery, or using and re-editing video recordings of classroom lectures via lecture capture.

Without learner support or academic assistance, though, delivery costs for MOOCs are zero, and this is where the huge potential for savings exist. If the cost per participant is calculated the MOOC unit costs are very low, combining both production and delivery costs. Even if the cost per student successfully obtaining an end of the course certificate is calculated it will be many times lower than the cost of an online or campus-based successful student. If we take a MOOC costing roughly $100,000 to develop, and 5,000 participants complete the end of course certificate, the average cost per successful participant is $20. However, this assumes that the same type of knowledge and skills is being assessed for both a MOOC and for a graduate masters program; usually this not the case.

Costs Versus Outputs

The issue then is whether MOOCs can succeed without the cost of learner support and human assessment, or more likely, whether MOOCs can substantially reduce delivery costs through automation without loss of quality in learner performance. There is no evidence to date though that they can do this in terms of higher-order learning skills and ‘deep’ knowledge. To assess this kind of learning requires setting assignments that test such knowledge, and such assessments usually need human marking, which then adds to cost. We also know from prior research from successful online credit programs that active instructor online presence is a critical factor for successful online learning. Thus adequate learner support and assessment remain a major challenge for MOOCs. MOOCs then is a good way to teach certain levels of knowledge but will have major structural problems in teaching other types of knowledge. Unfortunately, it is the type of knowledge most needed in a digital world that MOOCs struggle to teach.

MOOC Business Models and Cost-Benefits

In terms of sustainable business models, Baker and Passmore (2016) examined several different possible business models to support MOOCs (but do not offer any actual costing). The elite universities have been able to move into xMOOCs because of generous donations from private foundations and use of endowment funds, but these forms of funding are limited for most institutions. Coursera and Udacity have the opportunity to develop successful business models through various means, such as charging MOOC provider institutions for use of their platform, by collecting fees for badges or certificates, through the sale of participant data, through corporate sponsorship, or through direct advertising.

However, particularly for publicly funded universities or colleges, most of these sources of income are not available or permitted, so it is hard to see how they can begin to recover the cost of a substantial investment in MOOCs, even with ‘cannibalising’ MOOC material for or from on-campus use. Every time a MOOC is offered, this takes away resources that could be used for online credit programs. Thus, institutions are faced with some hard decisions about where to invest their resources for online learning. The case for putting scarce resources into MOOCs is far from clear unless some way can be found to give credit for successful MOOC completion.