Tuesday, April 29, 2014

Pricing Online Courses

We start with something related to, but not exactly, online classes.  

In a recent tweet I said “Why do people pay $4 for a  coffee, not for a mobile game? Maybe because no cost to making more of the game, there is to making more coffee.”   Some people have proposed that the “natural” cost of an item is equal to the cost of making a copy. I’m not sure I can separate this in my mind from other apparently ridiculous propositions such as Karl Marx’s notion that the value of something derived only from the labor put into it (the Labor Theory of Value, which I suspect I may not understand because it is so ridiculous on the face of it). Nonetheless, we have certainly seen the value of mobile video games, which can be copied for nothing, reduced to nearly nothing. Free to play games, which do cost nothing insofar as they are given away, are coming to dominate many sectors of the game market.

People rarely make comparisons between widely different things, but I’m occasionally struck by how people often don’t make comparisons even within a particular segment such as food. When measured by the pound certain foods cost a lot more than expensive cuts of steak, yet people who wouldn’t pay $11 a pound for steak will pay $11 a pound for other food items (that are not priced per pound, so the cost is an obvious).

Some people believe that the price of mobile games plummeted because too many companies were satisfied or desperate enough to price their games at a few dollars or even $.99. That is, prices would not inevitably plummet but they did because there were those willing to sell very cheaply. And of course that’s where the notion comes from that if the cost of making a copy is zero then ultimately the value will be zero, because someone, a lot of someones, will reduce their prices because they can make more copies of the game at no cost.

The question in my mind is, will the price of online classes “inevitably” go down to approaching zero because it costs nothing for another student to take the class, in effect a copy cost of zero?  Or will it go down to zero because some people are willing to offer classes for free?

The pressure comes from two directions. The commercial  online education industry has dabbled for years in MOOCs, free courses using video lectures originally recorded in seated university classes, though now many MOOCs are created from scratch.  No one is making money off this right now though there are visions of making big money in the future.

The second direction of pressure is the online course offerers themselves. Udemy.com, which I’m most familiar with, is in the long run shooting itself in the foot by offering huge discounts for their classes: 65% off, 75% off, $10 no matter how much it officially costs. As a result, those instructors who participate in Udemy’s “kamikaze marketing” as I call it have to price their classes at ridiculous values, often in the hundreds of dollars for an hour or four (or occasionally 12) of videos. And all the students are being conditioned not to sign up for a class unless it’s offered at an enormous discount.

Perhaps this works for classes with a more or less infinite supply of students, and often a short life-span. It must be said that a great many of the courses on platforms like Udemy are for hard skills, programming or learning how to use particular software. I also see a lot of classes on Udemy that I would call “touchy-feely,” how to feel good about yourself, how to be a positive person, things like that. But the online commercial business started with those hard skill classes, and the highest earners (over $100,000 a year) are still doing things like teaching how to use Microsoft Office. My classes, about game design, are soft skills, more about critical thinking than about how to use software (which, it must be said, is relatively easy to learn if you’re already good with software). There is much less demand for my classes, but they also won’t become obsolete when software is upgraded.

Before I opened any classes on Udemy I saw that this price pressure would happen, and opted out of the kamikaze marketing. I price my courses as roughly equivalent of books, so my 12-13 hour “Learning Game Design” course, which is over 100,000 words (about 140 words a minute by actual count with the help of Dragon NaturallySpeaking) is $39 (on my own site) or $49 on Udemy.  (In comparison my book “Game Design ” at 101,000 words is $38.50 .)

Udemy egregiously accidentally offered this course at $10 (I was later compensated for the difference).  I got about 30 people (out of a total of 105 in four months).  I haven’t tried to pin it down to individuals, but I suspect those people are much less active in the class than the average person.

Another way to look at it is, these classes are in competition with Continuing Ed classes that you might take at your local community college, which (in North Carolina at least) cost $65 or $130.  On the other hand those classes are longer, and have an always-available (during class time) instructor you can talk with.


Ultimately a lot of these classes exist and do well because people are unwilling to read long nonfiction tracts such as books, or they simply have difficulty learning from books. Many of those people are much happier learning from videos. A majority of the people in my big game design have never read a book about game design, though many have.

I confess that my videos are mostly me talking over slides so that students have the slides as notes for later (I provide them in downloadable form). There isn’t a lot to “show” in game design, at least not something to show that actually means anything as opposed to showing for the sake of showing. Contrast this with the hard skill classes where the instructor is showing on the screen exactly what to do with the software that the student is learning.

***

My initial strategy on Udemy.com was to offer a free course together a large group of students and then feed them into pay courses. About the time I had more than 3,000 people (which is pretty easy to do) Udemy unilaterally changed their terms so that people who had signed up for a free course were worth much less when they signed up for a pay course. The nominal notion was that with the new system instructors would get nearly all of the money paid by people who they recruited. It has turned out not to be true in practice, because even if someone comes via an instructor’s efforts - not only does Udemy track where people come from but you can use coupons to track where they come from - they have to sign up within two hours of first visiting Udemy, or they’re counted as a Udemy student. In practice virtually everyone counts as a Udemy student, 50%.

Meanwhile the people I had recruited into the free courses were credited to Udemy, not to me as the instructor.  An owner of Udemy figuratively thumbed his nose at those using the free-class strategy and said too bad for you.  At that point I started to look for alternative hosting.

I discovered that it was pretty easy to recruit students to free courses but hardly any of those students actually did any of a course. It’s as though the students were collecting courses rather than taking any.

Udemy made a huge error in the long run, I think, when they changed their instructor terms.  When I signed up, instructors received 70% of the price a person paid, or 85% if the student used an instructor-designed coupon.  That helped me decide to make my first class free, in order to recruit as many people as possible to feed into my pay classes.  When Udemy changed to their new system, experienced instructors saw a large reduction in revenue. 

Instructors asked themselves, why recruit people when they almost never get credit for it?  This encouraged instructors to branch out to other platforms; if they were going to recruit students, why not recruit to their own site rather than Udemy.  Combined with Udemy’s 50% take, this resulted in droves of instructors going to new start-ups who offered to support their classes while taking 15% (plus the 3% processing).  UseFedora.com and LFE.com are two of them.  I’m using UseFedora.  Yet other sites like Skilljar are popping up every week, all of them looking to take business away from Udemy and Udemy’s older competitors, some of them offering better terms (perhaps) than the two new competitors I mentioned.

Udemy realizes there’s a problem.  Udemy instructors are not permitted to put a URL in any promotional announcement to their Udemy students.  I was recently taken to task by Udemy for having my website’s URL in my profile, which had been the case since I joined Udemy because it was a URL.  Though it must be said that Udemy students aren’t very proactive about looking for less expensive sources.


I don’t know if pricing an audiovisual course like a book and offering no discounts is efficient or not.   My “Learning Game Design” course is getting longer as I find myself adding videos, and I may increase the price.  I have not been issuing coupons at all, and that goes counter to the conventional wisdom that people won’t buy online unless they get discounts.  I do know that in four months I’ve earned more from the course than I have from my book in 17 months.  That’s why I’m spending my time making online courses rather than writing books.  After I make the online course, I may find time to write a book or part of a book on the same topic.  Books certainly get more respect than online classes.

1 comment:

Courses in game development said...

The cost of the online courses has been increasing. They also charge the service charge, tax and VAT. All these all together seem to be a huge amount.

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