Coursera Credit Evaluation Prompts Some to Re-Examine Its Business Model

The announcement that a handful of Coursera’s classes were being evaluated for transfer credit recommendation sparked some education watchers to reexamine Coursera’s business model, and there examination has been aided by some newly released information about exactly how much it costs to develop a course and how much schools receive from the course.

According to a recent article in Princeton University’s campus newspaper, the school spent $250,000 developing and implementing classes for Coursera, the price tag included the use of studio space to record and edit the video lectures.

However, some professors began questioning the need for the sizable production price tag. Mung Chiang, who teaches an electrical engineering class through Coursera, told the Daily Princetonian that he didn’t see a need for “a broadcast center, camera crew, or extensive video editing” in a free online course.

The cost to develop a class that meets Coursera standards is not the only criticism of Coursera’s financial strategy being thrown around. Since Coursera’s contract with the University of Michigan became publicly available in July, it has been widely known that the for-profit company currently has no steady stream of revenue and that Coursera has also outlined multiple possible business models as they look for ways to make money.

However, the announcement that, as part of its bid to receive transfer credit recommendation from the American Council on Education, Coursera would begin charging students somewhere around $30 to take a proctored exam has raised the possibility that Coursera might finally start bringing in some funds.

A careful reading of the University of Michigan contract, as well contracts between the University of Toronto, and the Illinois Senate Task Force, by independent consulting and management firm Gilfus Education Group found some surprising information about Coursera’s revenue sharing agreements.

A post on the Gilfus Education Group’s website explains that the universities will only receive between 6% and 15% of any revenue that the courses generate. Coursera itself will only receive 20% of gross profits, accounting for costs and any previous revenue.

Tony Bates Associates, a private e-learning and distance education consulting firm, speculated that the remaining 80% of the profits will be funneled back to its investors, who have put more than $22 million into the start up. The contracts don’t stipulate how long it will take to repay Coursera’s investors, which include the University of Pennsylvania and the California Institute of Technology.

Follow Alex Wukman on Twitter @alexwukman

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