C.U. Online Program eCornell Posts Profits for Fifth Year

Discussion in 'General Distance Learning Discussions' started by Lerner, Dec 16, 2010.

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  1. Lerner

    Lerner Well-Known Member

    From another channel.


     
  2. SurfDoctor

    SurfDoctor Moderator

    I'm not clear on how a non-profit institution can legally operate a for-profit subsidiary. Seems a little like having your cake and eating it too.
     
  3. Cyber

    Cyber New Member

    The politics of education states that only I (non-profit schools) can make big profits.....

    It's amazing how we demonize for-profit schools, but the so-called non-profit schools, which we are told are the best schools to get degrees from, are also participating in parting a lot of cash from their students. Somehow, its ok for a non-profit school (by name only) to go after big profits. But it is not ok for for-profit schools to make profit (evil profit), or degrees from for-profit schools (which a lot of those same critics make money from through adjunct teaching jobs) are inferior. Is this not hypocrisy at its peak?

    I'm sure the usual suspects; critics of the for-profit school model, would tell us nonsense rationalizations that is somehow suppose to make it ok for non-profit schools to chase after profits, but for-profit schools can't (and if they do, degrees from such schools are not good; worst, graduates from for-profit schools are inferior, ill-educated and I'll equipped to teach at some schools).
     
    Last edited by a moderator: Dec 16, 2010
  4. AUTiger00

    AUTiger00 New Member

    Keep in mind that Cornell isn't answering to share holders that are always looking at ways to cut costs, even at the detriment to the quality of education provided to it's students. The profits eCornell is generatig are relatively small in comparison to those turned by for-profits. Even at the high end of the equation, ECornell's profits would only be a bit over $500k. Cornell is also a 150 year old brand, I don't believe they would do anything to tarnish that brand. I'm not sure publicly traded for-profits can say the same thing.
     
  5. SurfDoctor

    SurfDoctor Moderator

    It is also interesting to me that many of the for-profit schools are still much cheaper than the non-profit schools. I suppose that the expenses of a traditional university are much higher than the more streamlined profit schools, but it is still an interesting thought.
     
  6. StefanM

    StefanM New Member

    That is true. It is also important to consider the impact of financial aid. Institutional financial aid is generally much more generous at non-profit, traditional institutions. The "sticker price" may not necessarily be what a student actually pays.

    I think it is also a matter of faculty cost. If a school relies heavily on adjuncts (as the for-profits do), then faculty costs are reduced dramatically.

    I think, however, it's most beneficial to compare apples to apples.

    I work in a non-profit adult studies program at an extension campus. We do have full-time faculty members at our campus, but adjuncts still teach a majority of the courses. Our overhead costs are comparable to for-profit extension campuses, and this is reflected in the tuition. Our costs are similar to for-profit schools in the area.

    At our main, traditional campus, per-credit hour costs are roughly $100 more per credit hour. (It is difficult to calculate precisely as enrollment in 12-18 hours is charged at a flat rate on the traditional campus.) Among private colleges, our traditional campus is fairly reasonable (about $18,000 per year in tuition + $6500 for room and board = $24,500 per year), but our extension campuses are less expensive.
     
  7. CalDog

    CalDog New Member

    The news story states that eCornell's annual revenue jumped to $11.5 million, with an expected 2 to 5 % profit. That means annual profits in the $230,000 to $575,000 range. Let's say $500,000.

    The news story also says that eCornell was "established in 2000 with a $30 million investment from the University’s endowment."

    So is eCornell really profitable, given that it cost $30,000,000 (in 2000 dollars) to establish, and is now paying back profits of about $500,000 per year (in less valuable 2010 dollars) ?

    Furthermore, the news story says that eCornell has been running profits for the past 5 years. That's great, except that eCornell has been established for 10 years. So it probably lost money during the first few years of operation. Counting those losses, the total costs to Cornell are probably even more than $30,000,000.

    The reality is that eCornell, as a whole, does not appear to be a profitable investment (despite its legal "for-profit" status). Cornell has spent far more to establish the program than it is making back in profit.
     
  8. Maybe one of our business educated users can explain this better. Does eCornell steadily pay back the $30 mil investment or has that money "evaporated" in expenses to set up the operation? I have a feeling that Cornell's online presence, and getting in and establishing itself early, will pay off but I'm no expert.
     
  9. CalDog

    CalDog New Member

    In theory, eCornell will begin to pay back the $30M "at some point". But that point, after 10 years of operation, has not yet arrived. Instead, any eCornell profits are reinvested in eCornell:

    *****

    Cornell probably expects to lose money on eCornell, just as it expects to lose money on every other academic program that it offers. This is typical for non-profit schools. It makes up the lost revenue using investment income from its endowment (of $4.4 billion), from generous alumni support, and from state support (for certain programs, like agriculture and veterinary medicine).

    That's the difference between a for-profit school and a non-profit school. The University of Phoenix does not expect to lose money on any of its academic programs. If it does, those programs are closed.

    The reasoning for setting up eCornell as a for-profit subsidiary was to attract venture capitalists and other outside investors as partners. But with only $500,000 of profit per year to share, it's questionable whether investors are very excited about this opportunity.
     
    Last edited by a moderator: Dec 16, 2010
  10. StefanM

    StefanM New Member

    But eCornell doesn't really offer academic programs. It's essentially continuing education. I think this is where the problem lies.

    If they offered a degree online, then they could charge enormous sums of money while being extremely selective and would still have more applicants than they could handle. I don't see them doing this though, as it would probably be seen as damaging the brand.

    IMO, eCornell was a bad idea.
     
  11. AUTiger00

    AUTiger00 New Member

    Endowments are an interesting thing because the people giving the donations can specify what the money is to be used for (fund a professorship or scholarship in perpetuity, athletics, sciences, etc. Or the money could simply be given to the general fund) so theoretically some of that $30 million could have been given from donors that believe in distance education and were sold on the idea of eCornell (development officers are amazing at talking to prospects, figuring out where their interests lie and then selling them on a university program that fits those interests). I believe eCornell is run as a for-profit arm not because they were seeking VC, but because they were partnering with a for-profit company that manages the delivery method/format, staffs the program sales staff, administrators, etc. The only thing Cornell does with the eCornell programs is provide faculty/curriculum.

    Cornell likely didn't spend $30 m to establish eCornell, but invested the $30m and uses the interests earned on that money to service the operating costs of eCornell. The principal of an endowment is rarely- hardly ever- spent/ touched.
     
    Last edited by a moderator: Dec 16, 2010
  12. SteveFoerster

    SteveFoerster Resident Gadfly Staff Member

    There are all sorts of creative accounting maneuvers to keep reported profit low when it really isn't. I wouldn't take this figure at face value, particularly if eCornell has to pay Cornell for the use of their "intellectual property" or things like that.

    My question is more how it could possibly have cost thirty million dollars to set up eCornell. I mean, North Korea probably spent less than that to develop the atomic bomb! Okay, maybe not, but you see my point.

    -=Steve=-
     
  13. Woho

    Woho New Member

    On a sidenote, eCornell has again their December promotional running with with a 25% off on their courses ;)
     
  14. eCornell's web site has the feel of Ashworth College...

    Too bad the certificate has the for-profit entity logo on it:

    [​IMG]
     

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