The Netflix Flywheel In Education
How 2U's recent acquisition can provide focus for online schools
Based on my learning from UVA Darden's Business Growth Strategy course, I am writing a 4 part series on the growth of online schools. The course outlines 4 growth strategies: growth through scaling, entry, acquisition, and innovation.
The online schools I am discussing (often called cohort-based courses) are live, virtual schools for adults (typically post-undergrad) without accreditation.
This week's Darden Growth Strategy lecture discussed growth through acquisition. Taking a different direction for this post, I'm highlighting a recent acquisition in the online education world and what this means for small online schools.
2U, the publicly traded program management provider, bought edX for $800 million.
2U plans to use the acquisition to tap into the 39 million learners that take courses from edX. 2U spends significant money on marketing and acquiring new customers for their degree programs and short courses. Leveraging the edX brand will bring customers into the 2U ecosystem.
This move will allow 2U to compete more directly with Coursera. Coursera has the advantage of scale - they have 80 million users on the site, which helps to push down the costs of the degree programs.
In theory, bringing more users onto 2U’s platform will help to push down their costs as well.
This highlights a strategy across media (and now education): the Netflix content flywheel. The basic idea is that a company can amortize digital content creation costs over a large user base. More content leads to more users. More users bring more money in the door. More money leads to more content creation. More content leads to more users.
This highlights an important change in the online education environment. With large companies like Coursera and 2U putting more resources into creating and distributing high quality content, online schools need to focus on their advantages outside of content.
Wes Kao, co-founder of Maven and altMBA notes that a benefit of cohort-based courses (CBCs) over MOOCs is that CBCs "offer students ways to learn that are active and hands-on." In addition to active learning, CBCs offer learning benefits like community, a support network, accountability, live discussion of content, and peer-to-peer learning.
MyMBA and other CBCs are built on the premise that high quality educational content like the content provided by Coursera and 2U is valuable, but it is not the entire value proposition of education.
As online schools mature, they should be aware of the Netflix content flywheel model deployed by mature, capital-infused businesses. Rather than attempting to compete with Netflix, online schools can double down on what makes them such an amazing experience.