It has often been suggested that higher education is undergoing the changes we’ve seen unfold in other sectors – notably music recording and journalism. The Internet will do to us what it did to them. Apparently, we won’t like it.

“Look at the music industry. It’s been completely overturned by the Internet. My vision of the world is that everywhere will be like the music industry, but we’ve only seen it in a few places so far. Journalism is in the midst of the battle. And higher education is probably next.” Tyler Cowen

The nature of these changes is described using one or both of these related concepts: disintermediation and unbundling.

Disintermediation: The Internet makes it easier for people to bypass certain types of gatekeepers and mediating organizations to get products and services directly from the source. (Investing directly in the securities market, rather than through a bank, is a well-known example.) What constitutes the “source” differs by sector, but in most cases disintermediation tends to increase the intensity of competition between providers, improve choice for consumers, and drive down prices. In higher education, the vision is that students will be able to find learning experiences beyond what’s available from accredited institutions.

Unbundling: The concept of unbundling is applied in very different ways, depending on the industry. Essentially, though, it refers to the practice of marketing goods and services separately rather than as part of a package. A university degree, for example, can be understood as a bundle of courses. A music album is a bundle of songs; iTunes makes it easy to unbundle albums. Traditionally, institutions have required students commit to the degree/bundle. Public (state/provincial) funds are geared to serve these bundled programs. Unbundling in higher education would allow students to create a personalized compilation of courses from a variety of providers, in the same way that music fans create their own “playlists”.

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There’s no question that higher education is subject to these forces: more learning will occur outside of accredited institutions (disintermediation) and more institutions will make it easier for learners to pick and choose courses from multiple colleges (unbundling). But in their zeal to shake us from our complacency, writers that use these comparisons to the music and newspaper industries often understate important differences between higher education and these other, information-intensive industries.

“Substitute goods are two goods that could be used for the same purpose”

The key difference that warrants more attention is in the degree to which “substitute goods” are available. Consumers of music and journalism are relatively free to select new providers and to use them in new ways without the value of the goods declining appreciably.

Music recording industry (global) has seen its revenue flatline from 38 billion in 1999 to 16.5 billion in 2013. Music fans are purchasing single songs, rather than albums, p2p remains a factor, new platforms allow people to listen songs without paying (e.g. 8track.com), and while revenue from streaming services (e.g. Spotify) is increasing quickly, its yet to make a sufficient dent in earnings.

(insert graph of music industry earnings)

from http://www.nytimes.com/2013/02/27/technology/music-industry-records-first-revenue-increase-since-1999.html

For its part, news has seen its revenues drop during the past decade and a half.

Screenshot 2015-06-01 16.54.01

from http://www.journalism.org/2015/04/29/newspapers-fact-sheet/

Screenshot 2015-06-01 22.06.56

from http://www.journalism.org/2015/04/29/network-news-fact-sheet/

Consumers of news have access to a wider range of sources, many of which are free – some of them by professionals, most new sources are simply other news consumers, passing on information via social media.

When consumers seek out and consume news or music from new types of providers or use them in new ways, there’s no penalty or disadvantage. The quality may be lower, in the case of news sources, but rarely. New distribution models for music offer far greater value.

Not so in higher education and the difference, of course, is accreditation – the ability of the provider to offer recognized credit courses and bestow degrees and diplomas. In higher education, accreditation remains a key source of value. A student needs assurance that the education in which they invest their time and money will be widely recognized by other institutions and, in particular, future employers. In an increasingly mobile and mass society, the universality of credits earned becomes only more important. Learning is important, but no more than the ability of the degree to function as a signalling device in a world where CVs are read by computers (seeking keywords), and we apply for work at organizations we’d not heard of until we read the “help-wanted” ad. The importance of formal, widely recognized credentials won’t fade quickly, and as a result, disintermediation and unbundling will unfold far more slowly in higher education than elsewhere.

There is, however, a very strong parallel between higher education and news that, to my knowledge, has been totally ignored. I think it can help us understand how the Internet will impact higher education in the short-term, say the next five to ten years. We’ll examine this in our next post – coming June 9.

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