OpenFiction [Blog]

(Non)Profit sharing for OpenCourseWare?

Posted in open education, OpenCourseWare, sustainability by scarsonmsm on September 21, 2011

As we’ve been working through the possible business models to sustain OpenCourseWare, we’ve come across revenue opportunities that can be broadly divided into two categories—opportunities that depend on the site as a whole, and opportunities that meaningfully depend on content from individual course content.  There is some blurring between the two, as will be clear below, but it is a useful distinction nonetheless.

At the outset, too, I want to say that I am only discussing opportunities that are consistent with the mission and spirit of OCW, i.e. don’t charge end users for access to content.  There are plenty of opportunities that do charge end users for access to content, but those are best left to the faculty to negotiate directly with the other interested party.  (An example of this would be a faculty member who negotiated with a helicopter manufacturer to allow use of his course content in training materials the company developed for the military–a clear commercial use outside of the scope an license of OCW.)

For the uses I am discussing here, an example of the type of revenue opportunity that depends on the site as a whole would be corporate sponsorship writ large, where the company provides money to support the overall publication of our content.  Our sponsorship from Ab Initio falls into this category.  There is no one faculty member who can claim the funding came as a result of his or her contribution.  On the other hand, there are are clear scenarios, such as print-on-demand funded by a sponsor, in which faculty members have a strong claim to their content being a clear generator of revenue, since the orders are easily measurable.

We’ve tended to shy away from the second scenario becasue the faculty rightly have a claim to a share of the money coming in, and the complexities of arranging the profit share are daunting, especially given that any one opportunity is likely not going to generate a significant amount of revenue.  We’ve had a couple of instances that kind of cross the boundary–our Amazon links for instance, where the faculty might claim some share of the revenue generated by links on the site from books they use, but some of the revenue generated is on unrelated purchases such as computers, movies, etc.  In the Amazon case, the dollars are so small ($40K a year with 1,600 faculty contributors), there is no faculty interest in revenue sharing.

Beyond the complexity of it, another reason we’ve shied away from revenue opportunities that depend on specific faculty content is that the likelihood of any one scenario panning out is fairly slim, so we may go through a protracted negotiation with faculty only to have the opportunity fizzle, and going back to the well again and again on these is frustrating both for us and for the faculty.

So I’ve been imagining ways we might usefully address the complexities of this second category of opportunities, so that we might try some of them and generate more revenue without the negotiation and logistical headaches that seem to come with them.  The following scenario then, is a thought exercise in that direction that exists only in my head and this blog post, and DOES NOT represent any kind of program under discussion at MIT.  I share the idea because others in the OCW community might find it useful at their own institutions.

I’m imagining it might be possible to enlist faculty in an OCW development cooperative that would exist primarily to secure funding to support OCW, and secondarily to generate revenue share for participating faculty.  Here’s how it would work:  When faculty publish on OCW, they would be given the opportunity to join the cooperative, and if they did, their content would be flagged as available for use in revenue-generating scenarios within a set of defined boundaries (consistent with OCW’s mission and spirit as above).  If they chose not to, their materials would not be used.  This blanket participation would save us having to negotiate on individual opportunities.

In return for this permission, faculty would be assigned one share per course contributed to the site, as well as additional shares for other qualifying characteristics, such as an additional share per 100,000 visits to a course each year, or five additional shares for a course with a full series of video lectures.  This would help to balance the relative pull each course has in generating revenue.  At the beginning of the fiscal year, a target amount of revenue derived from cooperative efforts would be negotiated as a part of the overall OCW fundraising effort, say $500K.  If at the end of the year the total amount of revenue generated from efforts covered by the cooperative agreement is below $500K, then participating faculty get to feel good about supporting OCW; if the amount exceeds $500k, then the excess is divided among the shareholders according to shares held.

I have no idea about the tax implications of all of this.  Most of these efforts would end up being unrelated business income I’m sure, so taxable, and the agreement would have to specify how that would be addressed.  But such an arrangement would simplify ongoing negotiations with faculty, provide a potential incentive for participation, and aggregate distribution of shares from across multiple revenue streams.

Just a thought…

Addendum: I failed to include the possibility of departments also holding shares based on the level of departmental participation, which would recognize the value the department as a whole brings and incentivise the departments to encourage participation.

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