Virtual School Meanderings

February 15, 2011

Corporate K-12 Online Learning Entities

While this article is almost a month old now, it caught my attention from somewhere today:

PreK-12 Dominates Growth in E-LearningTHE Journal

This article reminded me that I had this entry (or at least links and images that I wanted to turn into an entry) saved to come back and finish at a later date – and I guess this is that latter date.  The line that particularly caught my attention in this article was:

“by 2015, preK-12 academic institutions in the United States will spend $4.9 billion on “self-paced” electronic learning products and services, according to a new report released this week by research firm Ambient Insight.”

In the next four years, the amount of money spent on self-paced electronic learning – including the database-driven online learning programs often marketed to credit recovery students – will be almost $5 billion in the United States.  One of the reasons this struck me was because of one of the blog entries I had saved for this entry, written by a business analyst, entitled Plato Learning No Expert in Making Profits.  This is potentially a $5 billion industry, yet this business analyst doesn’t believe this provider of database-driven K-12 online learning (among other things) doesn’t have the potential to make a profit or as much profit as it should.  Is there something wrong with this picture to you?

But this is just a small piece of the corporate environment within the K-12 online learning landscape.  This graphic from the 2010 Keeping Pace in K-12 Online Learning report is useful for describing the overall situation:

If we just examine the “Education Management Organizations” or what most of us would describe as the folks who administer the vast majority of cyber charter schools.  Unfortunately, the only one we can really look at is K12, Inc. – and that is because they are a publicly traded company.  You can actually look at their stock and other public information under the letters LRN on the New York Stock Exchange.  If we look at the performance of these two bodies (i.e., the New York Stock Exchange and K12, Inc.) over the past 12 months, and I used twelve months because the New York Stock Exchange graphic would only go back 12 months.

New York Stock Exchange

K12, Inc.

If you do some basic math you’ll see that the New York Stock Exchange had a little over 32% increase, while K12, Inc. increased by almost 74%.  I mention this, not to pick on K12, Inc. but to use them as an example of what I see as the larger issue.

If you look at the budgets for these cyber charter providers (at least in states where they are required to post public budgets), it is difficult – if not impossible to figure out how much of this increase in stock prices can be attributed to profits made from their administration of cyber charter schools?  I discussed this very issue previously, or most recently, in Funding Virtual Schools – Michigan Edition.

I mention this here again today for a variety of reasons.  K-12 education in general is big business, as there is a lot of money involved.  K-12 online learning is similarly big business.  However, for some – myself included – I’m not comfortable with a state or school district simply handing over 93% to 97% of the per pupil funding for each student to these for profit cyber charter companies with only this amount of information available.  If we had a better understanding of the funding model, how it works, and what kinds of profits these companies are making on the per pupil funding; some people – myself included – may be a bit more comfortable with this form of K-12 online learning and the funding models that are used.

It is this understanding or transparency that may prevent the fear that comes when I see things like this scroll through my Twitter stream:

In instances like this, my concern is for the students – both in terms of whether they are receiving an equitable education to their brick-and-mortar counterparts or, as my colleague Chuck would think about, how much better an education could these students have receive had ALL of that money gone directly to their schooling?


  1. One item to consider related to this post is that as we (Evergreen Education Group) have delved into the Ambient reports, we’ve never gotten a good sense of their accuracy or methods. The numbers from those reports have been widely repeated, to the point that they seem to be taking on a life of their own–your post, for example, repeats the number without questioning it. You repeat it right after the quote, so a discerning reader might follow the trail back to the journal article and the report, but the full report is not publicly available and the methods and background that is freely available does not give a very deep explanation.

    You are quite good at looking at numbers critically so I’m interested in your take on the Ambient reports. If you have insights into their accuracy that I have missed I’d appreciate knowing more.

    Comment by John Watson — February 15, 2011 @ 4:09 pm | Reply

  2. John, your point is well taken about the report – but doesn’t change the underlying question. Many people – myself included – have largely opposed cyber charter schools because it is seen as the McDonaldization of K-12 schools and a way for these companies to make substantial profits from public education dollars. In the absence of reliable information about how these programs are funded and how much of the tax dollars allocated to education end up as profit for these companies, the suspicion, mistrust and opposition will continue.

    Comment by mkbnl — February 15, 2011 @ 4:25 pm | Reply

  3. Michael, I agree that my comment wasn’t related to the main point of your post. I just felt the need to raise the issue about the use of stats when we have no idea of their accuracy. If I get a chance I’ll weigh in on your larger point.

    Comment by John Watson — February 15, 2011 @ 4:29 pm | Reply

  4. John, I’d love to hear your thoughts on the larger issue – as you’ve been able to look at cyber charter schooling more than most. I should also note that there should be a guest blog entry sometime this month from one of the cyber charter school providers on this issue. So I am hoping that sheds some more light on this issue too.

    Comment by mkbnl — February 15, 2011 @ 4:41 pm | Reply

  5. […] This post was mentioned on Twitter by mkbwsu, Raven McElman. Raven McElman said: RT @mkbwsu: Another new blog entry… Corporate K-12 Online Learning Entities […]

    Pingback by Tweets that mention Corporate K-12 Online Learning Entities « Virtual School Meanderings -- — February 15, 2011 @ 7:27 pm | Reply

  6. […] practices of these cyber charter schools (as I did only six days ago in an entry entitled, “Corporate K-12 Online Learning Entities“).  I ended that entry with the following: However, for some – myself included – […]

    Pingback by Quid Pro Quo Is Common In Politics… Now It Extends To Distance Education… « Virtual School Meanderings — February 21, 2011 @ 11:29 am | Reply

  7. […] Corporate K-12 Online Learning Entities « Virtual School Meanderings […]

    Pingback by Daily Links 03/24/2011 | Change Agency — March 24, 2011 @ 9:46 pm | Reply

  8. My district is opening a virtual k-12 online school in August. I have had concerns about the type of education it will offer primary student. I figured it would help the district recapture lost ADA money but didn’t really consider the funds that were going into the corporate pockets.

    Comment by Lynn — March 26, 2011 @ 4:38 pm | Reply

  9. Lynn, there is always educational money that goes into the corporate pockets. In the traditional brick-and-mortar schools most cafeterias are run by contracted corporations. The textbook companies obviously have big bucks at stake. The corporations that sell technology into the schools. We sign exclusive agreements with Coke and Pepsi in return for a new score board or upgrades to the bleachers in the school. So the notion of educational money going into corporate pockets is nothing new.

    What I think has changed, and this is where I become uneasy about this, is that we don’t simply hand over the complete operation of the school to Pearson or Prentice Hall or Pepsi or McDonald’s or any other corporation. The agreements that get signed with many of these corporate entities that run these cyber charter schools that is essentially what happens. The school or the district or the authorizer takes a small percentage for themselves and simply hands the money over to the corporation to run the school.

    I don’t know if this is what your own district has planned or if they plan to operate the virtual school themselves and simply contract with various companies to provide the learning management and student information systems, along with the content (which you could also develop on your own). So, depending on the route your district is taking this post may not be as applicable to you than if you were taking a different route.

    Comment by mkbnl — March 28, 2011 @ 12:14 am | Reply

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