Posted by: crudbasher | September 20, 2011

Is Netflix Showing A Possible Future For Higher Education?

netflix

Netflix has been burning up the tech world for the last few years. It created a disruptive business model to mail DVDs direct to customers at a flat fee, thus in short order destroying the local video store. The Internet made that possible.

In the last few months though, Netflix has done several interesting things.

1. They changed their pricing model. They used to offer their movie streaming as an add on to their DVD service. They didn’t have many new (or good) movies but that was ok because people perceived they were just getting that as a bonus. In the new pricing model you had to buy the DVD service and the Streaming service separately. They also went up in price a ton. (almost doubled)

The reason for this is pretty clear to me. They are a content middle man. As have been rather forcefully preaching on this blog for the last 21 months, the Internet is the death of the middle man. Digital content doesn’t need a 3rd party distributor. Content creators have been woken up to this fact thanks, ironically enough, to Netflix. You can see the result by the recent bust between Stars movie service and Netflix. Stars has been the source of most of the best movies on Netflix but it is time to renegotiate the contract. Netflix offered them a ton of money but that wasn’t enough. Stars wanted them to change their business model to charge more “for premium content”. Netflix said no thanks so in February, the Stars catalog goes away. Netflix is at the mercy of content producers like Stars. They have to pay top dollar now for content so they need to charge a lot more for the service. I can accept that. Pay more for better content.

2. A few days ago, the CEO of Netflix announced he was fissioning the company into two completely separate companies. The DVD rental service will be called Quikster (dumb name). The streaming service will remain Netflix. As any marketing person will tell you, branding is hugely important. Netflix has been building a very identifiable brand identity the last few years so why are they throwing it away with the DVD business? Simple. They think the DVD business will die off in the new few years. What you are witnessing is an amputation of an infected limb. Oh it seems ok right now, but the prognosis is terminal. In a few years when we hear the death throes of Quikster will we even associate it with Netflix? I bet not and that’s the idea.

So how does this all tie into education, especially higher education?

(cc) Express Monorail

Higher education has both an asset and a liability.

The biggest asset higher education has is faculty because they can produce new information and knowledge. They are the content producers for education. If you want to startup a cheap online school, you can teach existing knowledge but if you want cutting edge stuff you will have to pay for it to be created.

The biggest liability in higher education is the campus. A massive built in cost ties the hands of university presidents to a certain extent. They have football teams to pay for, and buildings to maintain. While this is a big problem, the bigger problem is that the university campus system as it exists can’t really scale well. Part of the skyrocketing price of college is simple supply vs demand. Demand is rising but supply is limited. Most of the growth in college admissions the last decade has been online. It’s easy to add more servers. It’s a lot harder to add a building.

Universities have the same problem that Netflix is dealing with. They deal in information and knowledge. You can get it in physical form (on campus) or you can get it digitally (online). I think that while the campus won’t go away any time soon, the percentage of on campus students vs overall university enrollments will drop steadily over the next 10 years. I wonder how many universities are being propped up by their online programs? I also wonder how many universities will close their physical campuses and go strictly online? That will be a shame but it’s probably going to happen a lot. This type of disruption is the essence of the Education Stormfront of change that I think is coming.

This post is more speculative than my usual ones and I invite your thoughts!

I found this article talking about how this may be good for Netflix.

I also found this summary (below) of the Netflix saga.

Posted from Diigo. The rest of my favorite links are here.

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Responses

  1. Great article – I like how you related Netflix’s problem with higher education’s. In addition to colleges having to close campuses (or at least scale back) in favor of online learning, they will also have to contend with the rise of universities like Stanford and MIT that offer many of their courses for free online. Granted, you don’t earn a degree from them, but the knowledge barrier has been erased.


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