Dive Brief:

• A new report from The Century Foundation cracks open about four dozen agreements between public universities and the online program managers (OPMs) that run their online courses, certificates and degrees, offering insight into how such deals are structured and the potential risks for institutions.
• The report outlines several "red flags" in these relationships, including contracts directly tied to enrollment or tuition revenue, and the inability for the university to "reasonably terminate" a contract or change providers. It also includes best practices for institutions to use when structuring deals.
• OPMs and universities have faced continued pressure to be more transparent about the terms of their relationships, and that's likely to continue with projections that the market for online learning will keep growing and consolidating.

Dive Insight:

The report builds on the foundation's 2017 review of OPM-university contracts, and the authors note that their latest findings reflect a continuation of the earlier trends. It takes a hard line, calling most OPMs "predatory for-profit actors masquerading" as public universities and that have "far more control' over the online programs than the schools themselves. 

A key issue across the contracts, the researchers explain, is whether and how colleges share tuition revenue and decision-making power with their OPMs. It suggests universities have more flexibility when they hire third-party partners on a fee-for-service basis to handle individual components of their online programs, rather than give a cut of tuition revenue to OPMs that manage a "bundle" of services.

In its review of 79 contracts between public colleges and OPMs, it found 41 pertained to the management of online courses. Of that 41, 53% used a tuition-share agreement, and 41% put the OPM in charge of recruitment.

Around two-thirds of contracts indicated the OPM developed the course or program. In one-third, the OPM also provided instruction — though the latter pertained primarily to boot camps and other short-term programs. 

The researchers also called out contract length as a concern, writing that "the longer a school's contract, the more entrenched in the school the OPM becomes." In more than half (56%) of contracts reviewed, the terms are five years or more. 

Other concerns include difficulty exiting the contract. Around one-quarter of contracts reviewed included terms such as automatic renewals; require the university to notify the OPM a few years ahead of its plan to exit or forgo renewal; and bans on contracting with other companies for similar services after termination.

Such concerns are expected to continue to generate pushback as the OPM market expands.

Global demand for the "design, development and delivery" of online education programs is poised to reach a value of $7.8 billion by 2025 — up from $3.5 billion today, of which the U.S. claims an 80% share — per a new report by education market research firm HolonIQ.

And HolonIQ's analysis suggests that further consolidation in the sector could be ahead. It predicted a handful of outcomes for the market, including one in which it will be dominated by a few, large OPMs offering a wide variety of services to institutions. Another is that it will remain competitive and fragmented, with institutions working with several partners for pieces of their online offerings.

The Century Foundation's recommendations would push the market toward the latter scenario. To be sure, the authors characterize relationships between OPMs and institutions as more positive when they involve contracts that limit the OPM's scope to a specific service and give the university an upper hand in deciding the program's direction. 

The industry has made small moves in response to pressure for more transparency. On Wednesday, a day before The Century Foundation released its report, OPM 2U put out a call to action for OPMs to go public with their university contracts. Among the items it suggests sharing are the institutions with which OPMs have agreements, whether those are on a revenue-share or a fee-for-service basis, and the resulting student outcomes and satisfaction measures.

However, whether other OPMs and, perhaps more importantly their university partners, will be willing or able to disclose such information is yet to be determined, analysts say.