Eduventures

Hot Programs and Hot Markets

Pearson Learning Solutions Summit

Las Vegas, Nevada

December 9, 2009

• Explaining Growth in the Online Higher Education Market

• The Role of For-Profit Providers

© 2009 Eduventures, Inc.

• A Closer Look at Growth Sectors: Markets and Programs

2

To date, online is both acyclical and counter-cycli cal; low penetration/ improving brand combination should perpetuate patte rn five years out

2,139,714

2,903,592

3,970,720142%

129%

105%

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

80%

100%

120%

140%

160%Online Headcount

Growth

Counter-cyclical tailwind- current and previous recession

By 2014, online headcount is forecast to hit c.20% of total headcount, up from c.11% Fall 2009


6,916 78,332229,363

1,260,605

1,783,095

53%

38% 39%

66%

47%

35%31% 27%

22%16%

20% 18% 15% 12% 11% 10%0

500,000

1,000,000

1,500,000

2,000,000

0%

20%

40%

60%

3

Online significance in the adult market- Eduventures estimates that in Fall 2009, online headcount represents c.24% of total adult (aged 25+) headcount at degree-granting schools and is forecast to hit 35-40% by 2014

Online share up for all major credentials; strong a ssociate growth; unrivaled master’s online penetration

30%

17%17%

20%

25%

30%

500,000

600,000

700,000

800,000

900,000

Est. Fall 2009

% Growth from 2008


12%

0%

5%

10%

15%

0

100,000

200,000

300,000

400,000

500,000

Associate Bachelor's Master's Doctoral

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Credential Est. Fall 2008 Online Share Est. Fall 2009 Online Share

Associate 375,000 7.8% 486,000 10.1%

Bachelor’s 711,000 7.1% 835,000 8.3%

Master’s 438,000 20.9% 510,000 24.4%

Doctoral 46,000 11.8% 52,000 13.3%

What Factors Are Likely to Shape the OHE Market Mov ing Forward?

Credential Key Market Influences & Expectations

Overall

Strong growth expected as a result of:(a) Growth in the adult learner age demographic, particularly ages 25 to 34

(b) Federal policy initiatives and economic stimulus funding creating incentives for adult learner, career transition, and online programming

(c) Credential inflation driving working professionals to seek more advanced degrees

Very strong growth expected as a result of:


Associate

Very strong growth expected as a result of:(a) Current prevalence of online courses at community and junior colleges

(b) Recent federal policy activity focused on community colleges

(c) Success of online two-year schools such as Axia College and Rio Salado College

Bachelor's

Steady growth expected as a result of: (a) Ongoing strength in the bachelor's degree completion market

(b) Continued lack of evidence on likelihood of increased online enrollment among traditional aged college students, however, makes projections difficult

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What Factors Are Likely to Shape the OHE Market Mov ing Forward?

Credential Key Market Influences & Expectations

Master'sVery strong growth expected as a result of:(a) Increasing number of adult learners

(b) Previous strength and success of the online master's market


Doctorate

Strong growth expected as a result of:(a) Emergence of clinical doctorate degrees as professional norm in various

fields (e.g., physical therapy, nursing practice)

(b) Previous growth and success in online doctoral market

(c) Online penetration at the master’s level, coupled with general credentialinflation, may generate demand for online doctoral programs

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7

For-profit share of online market has increased, sp urred by greater demand, constrained nonprofit supply, and for-profi t marketing

48%

39%

46%

42%

49%

38%

30%

35%

40%

45%

50%Est. Online Headcount by Control, Fall 2009

Control Public For-Profit Private

Fall 2008 865,000 700,000 225,000

Fall 2009 989,000 895,000 255,000

% change 14% 28% 16%

Higher Ed, Fall 2009

73% 9% 18%


12% 12% 13%

0%

5%

10%

15%

20%

25%

30%

Public For-Profit Private

Fall 2008

Fall 2009

Fall 2014F

8

Fall 2014F 1,950,000 1,500,000 520,000

Source: IPEDS, school data, Eduventures analysis

For-Profit Higher Education: Central to Expanding P articipation

403,441

666,176

400,000

500,000

600,000

700,000

Net Gain 1997-2007

For-Profits= 77% of net gain

In 2007, without for-profits, 4-year schools enrolled 50,000 fewer undergraduates aged 25+

Undergraduate Students Aged 25+


190,189

107,319

40,62814,841

-90,242-100,000

0

100,000

200,000

300,000

For-Profit 4-

Year

Public 2-Year For-Profit 2-

Year

Private 4-Year Private 2-Year Public 4-Year TOTAL

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undergraduates aged 25+ compared to 1997

Sources: IPEDS data and Eduventures analysis

Similar, if Less Striking Evidence at Graduate Leve l

126,264 122,481

270,998

150,000

200,000

250,000

300,000

Graduate Students Aged 30+

Net Gain 1997-2007

For-Profits= 47% of net gain


126,264 122,481

22,253

0

50,000

100,000

150,000

For-Profit 4-Year Private 4-Year Public 4-Year TOTAL

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Sources: IPEDS data and Eduventures analysis





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Participation Rates, Population Patterns Signal Onl ine Opportunity

9%

22%

19%

16%

21%

9%10%

15%

20%

25% Higher Ed Students by Age- Fall 2008 U.S. Population by Age- July 2008

Est. Online Headcount %


1%

3% 0.2%

0%

5%

18-19 20-21 22-24 25-29 30-34 35-39 40-49 50-64 65+Age

12

Key takeaway . U.S. higher education remains a fundamentally front-loaded system, with the 18-25 age band vastly over-represented. The online higher education market is concentrated in age bands where participation and population are most closely aligned. In absolute numbers, the 18-24 band (participation) and 50+ band (population) look attractive, but historically have either been unreceptive to online programs or to higher education generally. To sustain growth, online must develop current markets and seek new ones.Online Opportunities ? 1) Build on online interest in 25-49 band to grow participation (develop fields, credentials, differentiate to build market share); 2) Attract key segments of 18-24 band, including “traditional” graduate students, to online; 3) Grow 50+ demand; 4) Diagnose unmet subgroup demand (gender, ethnicity)

Est. Online Bachelor’s Market- top 10 unchanged from 2008 to 2009; most with average or better growth; handful of fields wi th real penetration

257,400

98,600

73,20062,640

48,800

14%

19%

27%

13%

6%

16%

8%6%

9%

12%10%

15%

20%

25%

30%

100,000

150,000

200,000

250,000

300,000Est. Online Headcount, Fall 2009

Est. % Growth from Fall 2008

Est. % Online, Fall 2009

Best Growth : Criminal Justice and Education- c.22%


41,76028,250 25,850 25,740

16,660

6% 6%

0%

5%

0

50,000

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Field of study skew- vulnerability or opportunity? At bachelor’s level overall, these ten fields represent c.55% of enrollment. In Fall 2009, these fields represent c.81% of online enrollment. The online market is steadily broadening by field of study, but remains very skewed by enrollment volume. Outside the top 10, no major field stands out as up-and-coming. Greater diversification is visible within key fields compared to total field range. This skew may signal longer-term growth limitations, as well as opportunities for disciplinary innovation.

Est. Online Master’s Market : top 10 unchanged from 2008 to 2009; business and education dominate, but online is mainstream in other fields, too

117,000

105,300

33,320

26%

19%

23%

45%

15%

30%

19% 19%

41%

24%

15%

20%

25%

30%

35%

40%

45%

50%

40,000

60,000

80,000

100,000

120,000

140,000Est. Online Headcount, Fall 2009

Est. % Growth from Fall 2008

Est. % Online, Fall 2009


25,08019,210 19,200 17,700

12,650 9,360 6,900

0%

5%

10%

0

20,000

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Master’s programs remain by far the most developed online higher education market : master’s programs offer the best combination of student maturity, short length, career focus and institutional comfort with experimentation- hence often very high online penetration. The big question is how deep might online penetrate, particularly in fields where online is already thoroughly mainstream. Outside the top 10, no major field stands out as up-and-coming. Compared to bachelor’s level, the online market is somewhat less skewed by field of study (c.72% v. 81% for top 10 fields by enrollment). This skew is in fact not much greater than for the top 10 fields in the master’s market in general- c.65% of enrollment.

The Stimulus Package Presents Opportunities over th e Next Few Years for Distance Learning Providers to Develop Programs Targeted at the Needs of New Market Segments

• The stimulus seeks to spur workforce development in key growth sectors and address broader infrastructure concerns:

– $3 billion for the Workforce Investment Act• Targeting workforce development in energy efficiency, healthcare, teacher training/educational

technology, and green jobs

– $7 billion for investment in broadband access, particularly in rural areas• Designed to spur economic development more generally, but targeting telemedicine and distance


• Designed to spur economic development more generally, but targeting telemedicine and distance learning

• Community computer centers and training � improved technology access for rural populations?

• Echoing the educational initiatives from the early months of the Administration, ARRA funding is likely to generate opportunities for online higher education providers to:

– Attract new market segments through programs to serve targeted /innovative industries

– Forge industry and government alliances

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