Open business models

Juggler from Fantata on Flickr

Gotta keep all those balls in the air to make your open business sustainable!

This is my post on open business models. This topic, like previous ones, revolved around the concept of sustainability, and how not taking the long term financial impact of your decisions seriously not only reduces your chances of succeeding, but also perpetuates the “free = shaky” misconception.

Opening up education: It’s not for everyone

In A Sustainable Model for OpenCourseWare Development, Johansen and Wiley build their argument on exposing Utah State University’s decision to shut down its open courseware initiative, based on funding issues, and MIT’s astronomical operating costs ($3.5M per year). Many projects, such at the Foothill De Anza Community College District’s SOFIA project, end with the end of external funding.

In order to determine the institutional benefits of opening the courseware, the three questions exposed in the article are the following:

1) What is the cost of development?

How much does it cost to open up a course? In some cases, digitizing materials and scrubbing copyrighted materials (by paying a license fee to use the materials openly or replacing the copyrighted materials by OER) might end up being the most expensive parts of the operation.

2) What is the impact on current business practices?

Would regular students feel left out if the course was shared with non-matriculated students? How would you sell your campus experience as a premium experience?

3) Is the effort sustainable?

Would opening up a course prevent students from enrolling at your institution, or put downward pressure on your tuition fee structure? Does it generate enough new revenues to justify staff and infrastructure investments?

In the case of BYU, it seems the new revenues generated by the open courseware initiative is sustainable, but mostly because of the choices that were made to make the conversion process as affordable as possible. Table 4 reveals that if an open course generates between 1 (higher education) and 10 (K12) new enrollments over 4 years, they have recovered their development cost.

More control = More money

Coming back to MIT’s example, because they are investing to create professionally edited materials that promote the MIT brand, the production costs per course are elevated. Other models, such as Rice’s Connexions are crowdsourced and require less internal resources to maintain. Cases where instructors develop their open course themselves, or with the help of students, have virtually no direct costs associated with them besides the time required to register keystrokes.

My rule of thumb is that the more your public relations people get involved, the more costly your endeavor will become. No offence, marketing folks 😉

What’s in it for authors?

Authors interviewed in Free: Why Authors are Giving Books Away on the Internet reveal many aspects of the new digital economy.

When asked what motivates them to openly publish their works, authors responded most frequently that (1) they had a desire to increase the exposure of the book, and (2) open publishing is, morally speaking, the right thing to do.
Another quote that caught my eye was from Tim O’Reilly:
Publisher Tim O’Reilly once quipped that, “Obscurity is a far greater threat to authors and creative artists than piracy” (2007)
By making their work available for free, authors increase the chance for people to actually read their work, pumping their reputation up, and allowing them to be recognized as experts. This reputation comes with keynote address invitations, consulting gigs, offers to sit of boards of directors, etc.
Opening up a book also allows for the work to reach unexpected places, such as described by Lessig regarding his Free Culture book.
[…] it “has been translated into seven different languages, audio versions are freely available, and it has been put into sixteen different ebook formats. All of these translations and format changes are freely available for others to download. Allowing others to remix Free Culture vastly expanded its reach.”
In terms of e-textbooks, as stated in A sustainable future for open textbooks? The Flat World Knowledge story, I was surprised to see that authors of Flat World Knowledge books got a bigger share of the sales than for traditional textbooks (20% versus 15%). What the authors lose in the sales price of the textbook, they can probably make up in volume over time.

Flat World Knowledge: Back to a shaky model?

To me, Flat World Knowledge has a pretty solid plan for the short term. Students, in my opinion and observation, are not ready to switch to digital, at least not for reading a textbook as a web site. So as long as the derivative products are marketable and that they keep their production costs under control, FWK will thrive.
I think their new push to sell the All Access Pass is a step in the right direction to play nice with campus bookstores, that still remain the powerhouse of textbook sales (for now anyway).

2 thoughts on “Open business models

  1. Pingback: Claiming my novice badge for #ioe12 | Open Reflections

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