Eduventures Richard Garrett's Online Higher Education Market Update 2008 National & New York Data

Online Higher Education Market Update 2008 National and New York Data Online Higher Education Learning Collaborative Eduventures, LLC February 2009

Overview Overview of the Online Higher Education market • National Market: sizing, segments and forecasts • National Market: positioning and differentiation • New York: selected data and observations 2 Copyright © 2006 Eduventures, LLC. Copyright © 2009 Eduventures Inc

About Eduventures Eduventures founded in 1993 Research and consulting Learning Collaborative for Higher Education • Increasingly competitive/complex higher education environment: need for data-driven decision making focused on common functional areas • Member-driven, shared-cost model OHE-LC (Online Higher Education Learning Collaborative) • Focused on online market expansion and characteristics, program development, and institutional strategy and operations - Increase/rationalize enrollment growth - Increase operational efficiency Schools benefit by leveraging the knowledge and experience of the program membership and OHE-LC staff. 3 © 2009 Eduventures, Inc. Copyright © 2006 Eduventures, LLC.

OHE-LC Membership, February 2009 92 members • Public - e.g. Empire State College, University of Illinois, University of Wisconsin Extension, University of Indiana, Rio Salado College • Private - e.g. Drexel University Online, Norwich University, Park University, Liberty University, Nova Southeastern, Western Governor’s University • For-Profit - e.g Laureate Education, Kaplan University, Capella University, EDMC, DeVry, APUS, Northcentral, Ashford, Corinthian 4 © 2009 Eduventures, Inc. Copyright © 2006 Eduventures, LLC.

Value for SUNY Learning Network… Unique, groundbreaking studies on online market trends Peer networking- monthly roundtables featuring Capella, Drexel, Nova, APUS, Kelley, Franklin, UMassOnline etc; plus Annual Member Meeting Unlimited quick turnaround custom research (phone, memo or data)- data points, perspective, synthesis, market overviews Larger-scale custom research- primary research, broader scope Campus visit 5 © 2009 Eduventures, Inc. Copyright © 2006 Eduventures, LLC.

© 2009 Eduventures, Inc. c.18% of all Online Market Size and Forecast students At 2010 base, 3,465,991 3,500,000 50% 14% growth 3,214,990 would be biggest 47% Online Headcount 45% net addition in Growth 3,000,000 history 2,878,213 40% 2,535,674 c.10.6% of 2,500,000 35% 35% all students 2,194,932 31% 30% 27% 1,923,599 2,000,000 1,707,945 25% Forecast impact of (perceived) severe 22% 1,400,672 1,500,000 recession 20% 1,101,346 16% 15% 14% 1,000,000 14% 843,931 13% 12% 623,563 10% 8% 425,575 500,000 5% 0 0% 2002 2003 2004 2005 2006 2007 2008F 2009F 2010F 2011F 2012F 2013F 7 Copyright © 2006 Eduventures, LLC. 5 Source: OHE-LC data, NCES and OHE-LC staff analysis. Fall entry

Notes… Degree-granting, Title IV schools only; Fall entry Online= 80%+ of formal instruction online (not online courses part of an otherwise campus-based experience) Historical base estimates revised down somewhat- in light of better evidence Assumption of major recession from Q4 2008 through at least 2009- where cyclicality (weakness in some non- military tuition assistance, corporate training, consumer confidence) may somewhat offset conventional counter- cyclicality Comparison with Sloan-C online course-level numbers/trends from 2007 report (9% growth from 2005 to 2006). Eduventures sees stronger growth at program level, including in terms of increased institutional participation Estimates based on extensive but incomplete, often ambiguous data 8 Copyright © 2006 Eduventures, LLC. Copyright © 2009 Eduventures Inc

© 2009 Eduventures, Inc. Adult Student Trends, Fall 1995-2007 So some evidence that for-proﬁt/online Adult Undergraduates- 12% increase may have grown the overall adult market; 1995-2007 (despite 1.5% drop in 25-44 6,000,000 60.0% BUT falling adult market share (36% in population 2000-2007) 1995 to 31% in 2007) compared to traditional students 5,000,000 50.0% 4,000,000 40.0% 3,000,000 30.0% Undergraduate # Aged 25+ Traditional age students Graduates 30+- Graduate # aged 30+ grew by a third at both 25% increase Undergraduate % Aged 25+ undergraduate and 1995-2007 2,000,000 20.0% Graduate % Aged 30+ graduate level between (despite negative 1995-2005 demographics) 1,000,000 10.0% 0 0.0% 9 Y1995 Y1997 Y1999 Y2001 Y2003 Y2005 Y2007 Copyright © 2006 Eduventures, LLC. 6 Source: NCES and OHE-LC staff analysis

Dynamics of online growth to 2013… Steady normalization of online delivery in terms of institutional/faculty participation and consumer familiarity. Recession-induced entrepreneurship v. conservatism. More competitive/differentiation Unmatched convenience; indirect cost savings (gas prices); growing sophistication/disciplinary range Evidence that online may have significantly grown adult participation between 1999 and 2007, and likely continue to do so Online focus and funding stability of military market; plus new GI Bill No let up in skills obsolescence, need for higher order skills, career change. Online as cost-efficient solution for consumers/firms Recession-induced tuition hikes, physical capacity/funding constraints of public schools, less traditional student body and online normalization will persuade a growing number of adults and (still forecast to be a modest proportion) of traditional age students to opt for online study Estimated dollar size of the online market- $6.2B (2005), $11.7B (2008); forecast of $26B (2013) Outcomes data still very limited 10 © 2009 Eduventures, Inc. Copyright © 2006 Eduventures, LLC.

Key variables/unknowns Nature of Downturn. Perception, severity, impact. Net cyclical or counter- cyclical? Adults. Post-2013, double-digit growth may be inhibited by upper limits (40%?) of online share of adult market (unless online more clearly grows the adult market overall), and interests of campus-based institutions to maintain online/campus balance Traditional Students. Possibility that traditional age student participation online at program level will be post-2013 growth vehicle, given low base (est. 5% in 2013, up from c.1.5% today) and strengthening drivers. Possibility of growth reacceleration International. Possibility that online may become a significant vehicle for cross-border higher education- driven by cost and security issues, as well as capacity constraints of conventional higher education in the face of growing unmet demand. Source of growth post-maturity of online domestic market? Fall v. 12 month headcount. IPEDS shows 12 month unduplicated headcount to be 29% higher than Fall headcount (21.9m 2003/04 v. 16.9m Fall 2003). 100% online schools, where multiple entry points are common, report average c.75% higher 12 month headcount. Norm of Fall reporting in U.S. higher education may significantly undercount online market size. Value of Fall reporting is significantly enhanced ability to benchmark online headcount against sector as a whole 11 Copyright © 2006 Eduventures, LLC. Copyright © 2009 Eduventures Inc

© 2009 Eduventures, Inc. By Control (Estimate- Fall 2008) 80% 1,200,000 74% 70% 1,028,000 Online Market Share 1,000,000 Higher Education Market Share 60% 53% Online Headcount 800,000 50% 620,000 40% 600,000 32% 30% 275,000 400,000 19% 20% 14% 200,000 7% 10% 0% 0 For-Profit Private Non-Profit Public 12 Copyright © 2006 Eduventures, LLC. 9 Source: OHE-LC data, NCES and OHE-LC staff analysis.

Commentary and Forecast by Control For-profit schools retain vastly Online Market Online disproportionate share of online Forecast, Share Headcount market (c.32%), compared to Fall 2013 (+/-2008) (+/- 2008) share of higher education 1,040,000 students generally (c.7%) For-Profit 30% (-2%) (+c.400,000) For-profit strengths remain- Private Non- 416,000 speed to market, execution, Profit 12% (-2%) (+c.140,000) marketing spend/technique, customer service, online fit with 2,010,000 Public 58% (+5%) (+c.1,000,000) mission Pressure on for-profit share- 3,465,991 TOTAL 100% (+c.1,500,000) steady normalization of online at publics with local/national brands, and often much lower prices points 13 Copyright © 2006 Eduventures, LLC. Copyright © 2009 Eduventures Inc

Copyright © 2009 Eduventures Inc Est. Online Students by Credential (Fall, 2008) 70% Relative weakness at undergraduate level- relatively few online programs at community colleges; less academically 59.1% experienced demographic; stimulus of 60% Axia College at associate level; emphasis on completion programs at % of Online Market bachelor’s level 50% 46.5% % of Offline Market Relative strength at graduate level- 40% short master’s programs; more Est. Online Headcount & academically experienced Market Share, Fall 2008 demographic; older consumer places 28.4% 28.3% higher value on convenience; greater 30% Associate= 339,000 (c.7.9%) institutional comfort for 22.2% Bachelor’s= 708,000 (c.7.9%) experimentation 20% Master’s= 431,000 (c.21.3%) 11.4% Doctoral= 46,000 (c.24.1%) 10% Undergraduate= c.7.9% online 3.0% 1.0% Graduate= c.21.5% online 0% Associate Bachelor's Master's Doctoral 14 Copyright © 2006 Eduventures, LLC. Source: OHE-LC data, NCES and OHE-LC staff analysis. Excludes certiﬁcates, ﬁrst professional and non-credit

Est. Online Headcount by Field (BA, Fall 2008) In General but NOT online Top 10: Visual & 300000 30% Online as mainstream Performing Arts, Engineering, Biological/Biomedical Sciences (1m+ students) 25% 250000 25% Est. Online Bachelor's Headcount Est. Online Market Share 200000 20% Ripe for 18% development? 16% 15% c.800,000 student 150000 14% market 13% 11% 9% 8% 100000 10% 5% 6% 50000 5% 0 0% IT ts ion s e C y e n es ar ar log tic ion tio s at hc sin ce us al ica ho uc at alt er ien Bu lJ str Ed yc un Lib He ina sc Ps ini m dm m im an Co Cr um ca /h bli er Pu um ns Source: OHE-LC data, NCES and OHE-LC staff analysis 15 Co Copyright © 2006 Eduventures, LLC. 12 Copyright © 2009 Eduventures Inc

Est. Online Headcount by Field (MA- Fall, 2008) 140000 45% Est. Online Master's Headcount 40% 40% 120000 Est. Online Market Share 35% In general, online is relatively 100000 31% 30% more signiﬁcant at master’s compared to bachelor’s level- 26% 80000 25% smaller, more conducive market 21% 20% 60000 19% 15% 14% 15% 15% 15% 40000 10% 9% In General but NOT online Top 10: Legal Studies, Biological/Biomedical Studies (c.200,000+ students) 20000 5% 0 0% T CI s e on g y n es ar ce log rin ion tio ati ns hc sin sti ee ica ho at uc tio alt l ju Bu gin str yc un Ed ca He ina En Ps ini m vo dm m im us Co Cr ca gio bli eli Pu y/r log eo Th 16 Source: OHE-LC data, NCES and OHE-LC staff analysis Copyright © 2006 Eduventures, LLC. 13 Copyright © 2009 Eduventures Inc

Positioning and differentiation trends Current explanation of online growth will remain very important- convenience, flexibility, adult learner, geography, programming, marketing, operations More sophisticated consumers means prospective student decision- making should become more demanding and rational Many schools will embrace differentiation strategies that suggest opportunities to go beyond “natural” assets (e.g. parent characteristics, local visibility), without the option of outspending the competition In a maturing online market, “online” will continue to diversify, schools will become more self-aware of the nature/value of current approaches/assets, and will do more to position this to the market On this scenario, more nuanced aspects of online offerings (e.g. platform, pedagogy, support services, partnerships, student body, scheduling, outcomes etc) will become much more developed and visible, and necessitate a more complex explanation of online value and for online growth 17 © 2009 Eduventures, Inc. Copyright © 2006 Eduventures, LLC.

Positioning and differentiation across 18 areas and 100 schools Source: Competing in Online Higher Education 2008, Parts 1-3 (OHE-LC, 2008) 1. Common Positioning 2. Uncommon Positioning Undifferentiated Undifferentiated Faculty Alumni Financial Aid Awards and Rankings Pedagogy/Student Experience Credit Transfer Pricing News Section/Blogs Scheduling/Acceleration Partnerships Status/Experience/Size Platforms Student Body/Diversity 3. Common Positioning 4. Uncommon Positioning Differentiated Differentiated Programming Outcomes Student Support Programmatic Accreditation Values 18 Copyright © 2006 Eduventures, LLC. 21 Copyright © 2009 Eduventures Inc

Conclusions… Online headcount forecast to reach almost 3.5 million by 2013 (c.18% of all students) Current economic downturn may initially slow growth in short- term; online will then become strongly counter-cyclical Post-2013, more significant traditional student or international participation may be key to further expansion Evidence regarding current prospective online student decision-making helps explain the relatively undifferentiated online value proposition characteristic of the current market A maturing market, in every sense, is forecast to drive a more nuanced and diversified approach to positioning and differentiation This scenario may be more supportive of growing the online market into additional disciplines and demographics Multiple opportunities for online active schools to differentiate; building on threshold standards 19 Copyright © 2006 Eduventures, LLC. Copyright © 2009 Eduventures Inc

Adult Student Undergraduate Enrollment at NY Schools, 1995-2007 300,000 40.0% 271,725 258,833 255,096 251,377 35.0% 247,583 250,000 234,317 224,996 30.0% 200,000 25.0% Growth 1995-2007: -8.9% 150,000 20.0% Undergraduate # Aged 25+ at NY Schools 15.0% % of all undergraduates at NY 100,000 SUNY Schools: -18% schools 10.0% (c.35,000 in 1995 down to some 29,000 in 2007) 50,000 5.0% - 0.0% Y1995 Y1997 Y1999 Y2001 Y2003 Y2005 Y2007 21 Copyright © 2006 Eduventures, LLC. Copyright © 2009 Eduventures Inc

Enrollment & Population- U.S. v. NY 50.0% Trends: Both NY and U.S. saw traditional age 42.9% 40.0% undergraduate growth far in excess of population 40.0% growth. By contrast, while the U.S. saw above U.S. population growth among adult undergraduates, 30.0% NY saw below population decline. WHY? NY 20.0% 12.3% 11.8% 9.0% 10.0% 0.0% -1.4% -10.0% -8.9% -7.8% -20.0% Under 25 18-24 population Over 25 25-44 population Undergraduate 1995- (2000-2007) Undergraduate 1995- (2000-2007) 2007 2007 22 Copyright © 2006 Eduventures, LLC. Copyright © 2009 Eduventures Inc

Top 20 Adult Serving NY Schools- Online Presence School Adult Students 25+ Fall 2007 Online Category Excelsior College 33,117 Major New York University 17,260 Emerging Columbia University in the City of New York 12,433 Emerging Touro College 10,679 Major SUNY Empire State College 10,664 Major CUNY Hunter College 8,482 Courses only SUNY at Buffalo 7,721 Emerging Stony Brook University 7,485 Significant CUNY Queens College 6,948 Courses only CUNY Borough of Manhattan Community College 6,537 Courses only CUNY Brooklyn College 6,410 Little or none Suffolk County Community College 6,261 Courses only CUNY Bernard M Baruch College 6,075 Little or none Monroe Community College 5,765 Significant CUNY City College 5,520 Courses only Fordham University 5,504 Little or none CUNY Lehman College 5,362 Courses only Mercy College-Main Campus 5,253 Significant CUNY LaGuardia Community College 5,028 Courses only Nassau Community College 4,945 Courses only 23 Copyright © 2006 Eduventures, LLC. Copyright © 2009 Eduventures Inc

Copyright © 2009 Eduventures Inc Observations… NY degree-granting schools experienced a net loss of adult undergraduates between 1995-2007 (-8.9% compared to 11.8% nationally); SUNY schools experienced even steeper decline (-18%) Partly explained by NY’s steeper than average 25-44 population decline between 1995-2007? Also, NY experienced very strong increase in traditional age participation- up 42% over the period (SUNY schools up 24%) Compared to many other states, NY exhibits relatively few major online players, with much activity at course rather than program level Within SUNY LN- little online bachelor’s activity outside Empire State College; predominance of online associate programs (but typically not from SUNY schools that enroll most adult students) Eduventures consumer data shows average, or perhaps above average interest in online study among NY residents. Also, above average educational attainment- impact on online activity? Hypothesis: weaker adult population/enrollment, and robust traditional student enrollment, have dampened online program development in NY to date? Or, has relative lack of online programs dampened adult student enrollment? Might post-2009 fall in traditional student numbers, and booming adult figures, spur more 24 online activity? Copyright © 2006 Eduventures, LLC.

Thank you Please direct any feedback or questions to: Richard Garrett Program Director & Senior Analyst, OHE Eduventures, LLC Prudential Tower 10th Floor 800 Boylston Street Boston, MA 02199 617-532-6081 (Direct) rgarrett@eduventures.com 25 Copyright © 2006 Eduventures, LLC. Copyright © 2009 Eduventures Inc

Eduventures Richard Garrett's Online Higher Education Market Update 2008 National & New York Data

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