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The Digital Skeptic: Online Education Fails Economics

School's out forever
All it takes to see the rough course ahead for Coursera is to bone up on the actual contract published by The Chronicle of Higher Education between the company and the University of Michigan. Here you should recognize most of the value-killing bad habits that have crippled the digital music, publishing and movie businesses.

First, Coursera tries to do business not only in a new digital way, but in a terribly complex one. Go to Page 3 and there is not one business Coursera is in, but three. There's the "Coursera Monetization Model," the "University Monetization Model" and the "Registered Students Model." Besides having the "your guess is as good as mine" vibe as to what businesses these actually are, there are what appear to be tricky revenue splits all over this campus. That means anybody close to this outfit should tool up for painful audits, complex disclosures and the bad blood that pollute the music and movie business.

Not surprisingly, tensions seem to be flaring between different players in the school course content supply chain.

"Wow. That contract looks terrible for instructors," Cima wrote to me when I emailed him the Michigan memo. Cima was concerned about a release he would have to sign and losing control of his courses.

Coursera's Daphne Koller responded via email that Cima had nothing to fear. The release was merely for marketing photos. She was firm that professors and schools control their material and no deals are exclusive.

"This is entirely on a volunteer basis," Koller wrote.

Which graduates us to the 800-pound gorilla sitting in the classroom. Just like in the music or movie industry -- where Napster, Spotify, Last.fm, Netflix and dozens of other content sites fight a no-win battle selling the same stuff -- Coursera faces essentially limitless competitors from existing and as yet to-be-born outfits offering the same content.

Koller told me over the phone that the multifaceted business model sounded far more complex than it really is. And the level of competition her firm faces does not concern her.

"Our goal was to offer free education to everyone in the world," she said. "Whether it makes money or not is not at the heart of what we are doing."

Which is handy, since like many other Web classmates, Coursera is really in the "business" of offering valuable content -- this time, its $6,000 classes -- for nothing.

To these tired eyes, all this company will do is prove, yet again, that this model is as broken on campus as it is in the real world.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.
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