To get the model right, we need to inspect the value chain more closely.

It’s been a COVID- and US national politics-blurred couple of months since I last posted here. Much has transpired in those months and it’s clear that nothing in education and EdTech will be the same as it was, and yet we still have so much to learn about how the sector will evolve. If you’ve been following Michael’s posts, you know we have our fingers in some things and remain excited about the possibilities for large-scale, positive impact with the next wave of technology-enabled teaching and learning.

I have to say, this “Netflix of Education” thing has legs. The typical half-life of “X of Education” comparisons is roughly 42 days. Yet after a spate of comparisons by McGraw-Hill, Pearson, D2L and Udemy a few years ago, we have at least two notable players claiming the specific comparison again in recent months.

I get that Netflix is a media company, some call it a TV station, or a video on demand platform, and therefore media…content…education, you know, they are kinda related?

But what is driving serious companies and executives to use the phrase in often remarkably different contexts? What’s driving the interest in aligning a business value proposition to that of Netflix? I thought about a couple of different ways to examine the question and decided on an easy framework of “they either mean it literally, or they mean it figuratively”.

Let’s look at both cases.

Literally

If taken literally, it should mean the company is proposing some kind of platform for a direct to student streaming service that is offered by subscription. Netflix is inherently a consumer service, so I will include that in the literal definition This would allow learners to access a wide variety of “learning” on internet connected devices. And ostensibly the learners would receive “personalized” lists of additional learning to consume, you know, to increase | improve | extend their learning.

Certainly, Cengage has referred to their Unlimited subscription service as a “Netflix” model. For 4 months at a time, students can get access to any of Cengage’s eTextbooks for $69.99, or upgrade to get all the online homework platforms as well for $119.99. But the adoption is tied directly to courses the students are taking. I believe the rule of thumb is if a student is taking at least two courses that use Cengage materials, they benefit economically. The math for the bundled access seems to work well for some students, as Cengage reports continued, albeit slowing, growth of Unlimited adoption. But it is not an obvious no-brainer, as half of their digital activations are not under the Unlimited umbrella.

Like Netflix, this is uber transactional. I don’t know whether some students are trying to self-substitute Cengage products for their other non-Cengage-using courses, or if others are simply hoovering up loads of knowledge, but I do know people who flip from one streaming service to the next to get what they want, when they want it. This is far from a lifelong relationship.

Looking at Pearson’s shifting language over the last few years, the Netflix reference was originally about “one platform to rule them all” inside a company with more platforms than sharks have teeth or Netflix has TV titles. Michael covered this at the time and was called into the CEO’s office for a word, so I won’t retread that, but the magical platform has yet to appear at any real scale across different “learner ages and stages”. It definitely has not provoked visible innovation, new product launches, or helped reposition Pearson in the market four years hence.

Recent language from the new leadership at Pearson gives a nod to Netflix but wisely eschews a full embrace. Nonetheless, they are very open about the direct-to-consumer relationship opportunity they see and are organizing the business very directly in that manner, referring to it as the “direct-to-learner” strategy to have a direct relationship with millions of learners globally.

The challenge here, well-trodden but worth repeating, is education is not intrinsically a consumer market. Higher Education today is pre-dominantly heavily mediated by accreditation, institutional cultures and individual teacher/faculty choice. The same holds for K12 with less teacher choice. Students choose their course. Students do not choose their course material. The course platforms do not, and should not, offer “…other students who used Product X, also liked Product Y” cues.

Furthermore, what is true about education, and not media, is that high quality, rigorous, and certifiable education essentially requires a human known as an educator. The learner in this equation is not simply streaming content but interacting with it and getting cues from the educator. Simply providing “consumers” with a playlist of educational content will not be the winning strategy. Education is something that is done by the learner, actively facilitated by the educator, rather than “Netflix and Chill”. (Dude, did you see that chapter of Campbell’s Biology last night? Those B-heads, Woah!)

And yet furthermore, a direct-to-learner strategy begins to position Pearson as a competitor to its own customers today. In other words, a direct-to-learner, learn-on-demand AWATAD (anywhere, any-time, any-device) strategy inserts Pearson directly between institutions and students. This is true even if Pearson’s strategy is more oriented around supplemental, or strictly skills-oriented learning, because all of the institutions are busy trying to pivot to similar offerings. Indeed, for Pearson to make that move, you also have to believe the broader sector realizes tectonic level breaks in long-established norms like accreditation. Otherwise, the quantity and quality of demand is simply too unpredictable, as the MOOCs know all too well.

There’s another likely outcome of Pearson moving to a direct-to-learner model: to achieve this strategy, Pearson needs to “spin-off” the Higher Education business unit. Doing so takes some of the customer-cum-competitor stressor off the table. Plus, it fits well with the same thesis that drove the separation of the K12 publishing unit; that the old-line content publishing franchise doesn’t reflect the simpler, digital-first business model and experience brand dynamic of the “new” Pearson. Selling the unit might be a tall order given some of the declining metrics like market share that might make it difficult to operate stand-alone. And the post-secondary textbook publishing space doesn’t seem to offer many options for classic roll-up private equity plays as the recent CL/MHE saga bore out. But it would lighten up the mother ship to pursue a dramatically different strategy!

Figuratively

So maybe “the Netflix of education” means something less literal. What could it be? Let’s start with culture.

Seven Aspects of Netflix’ Culture:

• Values are what we value – there are 9 behaviors and skills that are valued: judgement, communication, impact, curiosity, innovation, courage, passion, honesty, selflessness
• High Performance – rigorous talent management
• Freedom & Responsibility – empowered teams
• Context, not Control – no top-down autocracy
• Highly Aligned, Loosely Coupled – clear on strategy and key objectives, degrees of freedom to get things done
• Pay Top of Market – and sever generously and unapologetically
• Promotions & Development – feed the talent virtuous cycle

Nope. Based on my own experiences and observations, the aspects of Netflix’ culture don’t completely fit with the publishers. Granted, it’s easier to foster a culture based on context, not control, keeping alignment with loose coupling, and empowering teams when you are not excising billions of dollars of cost out of the business. So that can’t be what they mean.

I will offer that the most applicable figurative interest for any business to compare itself to Netflix is its earnings multiple, currently 4x Pearson’s.

A way forward for the Netflix of Education?

Ok, enough of that, I do want to press ahead on the question. Is there actually a way for in which a “Netflix of education” could work and create value for the sector? I think so, but it requires a far less literal analogy and must express a deep understanding of the complexities and nuances of the value chain and affordances necessary to deliver education.

A drive by of Ben Thompson’s terrific Stratechery.com site gives a good framework for how we might think about this in the context of aggregation theory. The idea is straightforward:

The value chain for any given consumer market is divided into three parts: suppliers, distributors, and consumers/users. The best way to make outsize profits in any of these markets is to either gain a horizontal monopoly in one of the three parts or to integrate two of the parts such that you have a competitive advantage in delivering a vertical solution. In the pre-Internet era the latter depended on controlling distribution.

But the internet has disrupted distribution of digital goods by making it essentially free and neutralizing the integrated supplier-distributor advantage. The internet also drives transaction costs close to zero, making it far easier for a distributor to integrate forward with end users/consumers at scale. Thompson goes on:

Instead, suppliers can be commoditized leaving consumers/users as a first order priority. By extension, this means that the most important factor determining success is the user experience: the best distributors/aggregators/market-makers win by providing the best experience, which earns them the most consumers/users, which attracts the most suppliers, which enhances the user experience in a virtuous cycle.

So, for the Netflix of Education to work, the first issue is proper identification of the end user. I posit the most effective model suggests that is the educator. The educator decides what is taught, what material is used when, the manner with which that material is to be interacted with the learners. And the educator governs the assessment of the learner, which routinely involves feedback and guidance. All of this holds largely true even with adjuncts. To get the model right, we need to recognize educators for what they are: consumers, content creators and curators, and distributors. Thus, the Netflix for Education would need to embrace the content creators broadly and allow for large-scale syndication and sharing of their work and practice.

A key reason Netflix works on the technical level is there are standards for delivered video content and they in turn manage bit rates and device specific formatting to ensure the AWATAD user experience. No such set of standards exists for education content and assessment. Vendors/providers are notoriously restrictive with their copyright IP and black-box with their delivery and assessment technology. And content stranding is a common fear for early adopters of adaptive platforms. So, the Netflix of Education would need technical standard models that support content transparency and portability beyond what is currently available today.

And Netflix’ rise was also due to the focus on a great user experience as Thompson suggests. Since virtually all of the publisher products support only a fraction (typically well less than half) of a course on syllabus- or portion-of-grade basis, the teaching faculty are truly the final-mile content creators and curators. They drive the pedagogical interaction model with the learners. They determine what matters in the “preferences” of the learner. The Netflix of Education would need to afford them much more control over that learner journey personalization and experience, regardless of modality.

Seamlessly delivering interactive, instructor-mediated learning experiences at scale is a far more complicated problem than seamlessly delivering non-interactive video. The fragmented ecosystem we know today lacks the depths of standards and alignment of business models to create the frictionless world we might imagine when we invoke Netflix. That doesn’t mean it is impossible, it simply means there’s a lot of work to do. It doesn’t mean it isn’t worth trying to do, it just means we need to consider where the value accrues.

More. Soon.

Disclosures: Pearson is a current sponsor of the Empirical Educator Project. Curtiss is a prior Pearson and Cengage employee. Michael is a prior Cengage employee. Neither Curtiss nor Michael have been employed by Netflix, but both are subscribers. Curtiss’ oldest daughter occasionally refers to a (non-Campbell) Pearson biology textbook while attending college. All of Curtiss’ daughters are highly active and likely lifelong consumers of his Netflix subscription. Michael has chickens.

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