It’s often suggested that higher education is undergoing the same 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 typically 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 other 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 leads to an increase in the intensity of competition between providers, improves choice for consumers, and drives down prices. In the higher education context, disintermediation takes the form of students learning from organizations outside of accredited institutions.
Unbundling: The concept of unbundling 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 full degree/bundle. A range of standards and practices, such as how student loans are devised and distributed, reinforces the bundled model. The vision of unbundling in higher education is of students creating their own personalized compilation of courses from a variety of providers, in the same way that music fans create their own “playlists”.
Substitute Goods and Credentials
There’s no question that higher education is subject to the effects of disintermediation and unbundling: 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 dire comparisons to the music and newspaper industries tend to understate important differences between higher education and these other industries.
“Substitute goods are two goods that could be used for the same purpose”
The key difference is 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. Not so in education.
People are accessing news from a wider range of sources, many of which are free. Some of these sources actually produce news, others simply aggregate and redistribute news developed by larger established news organizations. Individual consumers become producers of a sort when they pass on news through social media.
Music consumers 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 although revenue from streaming services (e.g. Spotify) is increasing quickly, it has yet to make a sufficient dent in earnings.
There is no material disadvantage to a consumer that chooses to get their news or music from new sources or to use it in new ways. For students, the disadvantages are significant. The difference, of course, is accreditation – the ability of the source to offer recognized credit courses and bestow degrees and diplomas. 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 a mass and increasingly mobile society, the universality of credits earned is crucial. The degree functions as a key signaling device in a world where CVs are just as often read by computers than humans, 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.
Disintermediation and unbundling are important concepts for understanding the future of higher education. But there is another parallel between higher ed and other digital, information-dependent industries that may prove to be more important in the short-term. It involves the impact of the Internet on the level of investment that’s available for the development of any one digital product. The massive expansion of the number of providers and the dispersion of eyeballs that followed (and with it, revenue) has at times reduced the amount of funds available for higher quality digital products. This impacts news journalism, in particular. The potential parallel is online course development. We’ll address this connection in the next installment.
Part II of this post can be found here.