Public College Creates For-Profit Distance Ed Company
When traditional, nonprofit higher education institutions opt to provide distance education, they soon discover that such an enterprise requires institutional experiences and skills not normally found among campus administrators. Recognizing its limitations in this area, the University of Maryland-University College recently won approval to create a for-profit, marketing business to help develop and sell the school’s online education offerings.
“The development of this company will enable us to break the traditional-thought mold for the way educational providers compete in a commercial setting,” says Dr. Gerald A. Heeger, president of University of Maryland-University College. The arrangement, which was approved by the University of Maryland Board of Regents in early December, appears to be the first such one for a public university in the United States. A few major private universities in the country, including Temple University and New York University, have recently launched for-profit businesses to market continuing education online courses.
UMUC officials say the move is necessary because the institution is seeking to compete globally with its online education programs. The new company’s name is UMUC OnLine.com Inc.
“Offering courses online is a highly competitive business,” Heeger says.
In comparison to its private university counterparts, UMUC’s move to strengthen its online marketing muscle is seen as one more closely aligned with its mission because of the institution’s long history in providing distance education to overseas U.S. military personnel.
“The University of Maryland is widely recognized as a leading distance education provider. The university has a great reputation for its work with the [U.S] Department of Defense,” says Mark S. Hall, co-founder and CEO of Ed-X.com, an international marketing firm that assists organizations seeking to market their online education programs.
In addition to educating overseas military employees, UMUC is the only one of 11 degree-granting institutions in the University of Maryland system that specializes in providing educational opportunities for working professionals in Maryland.
Heeger says that in recent years UMUC has become the largest degree-granting public institution of African Americans in Maryland, second only to historically Black Morgan State University.
Over the past five years, UMUC’s online enrollments have either doubled or tripled from year-to-year, UMUC officials say. In the 1998-99 school year, UMUC had more than 21,000 online enrollments in 430 online courses. The U.S. market for online distance education is a growing one. Between 1994 and 1998, college-level distance education course enrollments grew from 753,640 to 1,343,580, according to the U.S. Department of Education.
UMUC is investing a million dollars in the venture and officials are meeting with private investors and venture capital firms to attract more investment, Heeger says. The marketing company, which is expected to begin operating later this year, will derive its revenues from the fees students will pay the company to access an online course. The marketing company will turn over a portion of the fees to UMUC to pay for the cost of the course, Heeger says. UMUC also will accrue profits from the venture.
Although the UMUC’s share in the company will dilute over time as private investments accumulate, Heeger says UMUC OnLine.com Inc. will adhere to strict policies according to the business activities it can pursue. One goal for the venture is to grow the company as a candidate for an initial public offering, or commonly known as the IPO.
“Within five years, we expect an IPO will develop for the company,” Heeger says. He became president of UMUC last August, Heeger previously served as dean of NYU’s School of Continuing and Professional Studies, and founded the company in 1998 that markets NYU’s online continuing education courses.
Hall says launching a private company “makes sense” for UMUC because online education requires a different business approach than schools have had with traditional higher education programs. Institutions are used to sitting back and waiting for students to come to them, he adds, but with online distance education, the burden of attracting students is shifted entirely to the institutions.
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