MBA News: University of California Launches New Online MBA Program
It’s no secret that demand for online MBA programs is booming. Now—in a move bound to raise eyebrows—the ten-campus University of California is launching its first fully online MBA degree. The university will offer the degree, branded as MBA@UCDavis, through the business school at the Davis campus.
Several aspects seem remarkable about the UC Davis announcement. First, this new offering isn’t exactly “priced to sell” as a bargain. On the contrary, this degree will debut as the fifth most expensive online MBA program in the world—and the third most expensive from a public university—at $104,400.
Announcement of UC Davis’s first-cabin price crossed newswires only weeks before a private Eastern university announced an MBA degree priced at the opposite end of the spectrum. Boston University’s Questrom School of Business decided to price their online curriculum at almost $100,000 less than their full-time program—at only $24,000.
The new degrees from UC Davis and Boston demonstrate how the market for online MBA degrees is still in flux, but moving mostly at the high- and low-price extremes. Questrom priced their online degree slightly above that of the swiftly growing $22,000 online iMBA program at the University of Illinois.
The curious $100,000 price differential between the new UC Davis and Boston University online MBAs comes during the second year of a steep decline in applications to on-campus MBA programs owing to two primary factors. One is that international students, concerned for their personal safety in the midst of mass shootings and the Drumpf Administration’s relentless anti-immigrant posturing, are abandoning plans to study in the United States in favor of business schools in Canada and Europe.
A second factor is that Millennials, weighed down with more debt than their Generation X or Baby Boomer predecessors, aren’t as willing to forego a hot labor market to pursue expensive master’s degrees. Data recently released by the U.S. Department of Education disclosed that 92,800 individuals who graduated with MBA degrees in 2016 and 2017 had to take out a staggering $3.7 billion in student loans to do so.
UC Davis’s pricing policy fires a warning shot at schools like Carnegie Mellon’s Tepper School of Business, the University of North Carolina at Chapel Hill’s Kenan-Flagler Business School, and the University of Michigan’s Ross School of Business. Its pricing signals that the University of California intends to compete for students against these other premium-priced programs.
Currently, only four schools offer more expensive online MBA programs than UC Davis. Carnegie Mellon’s Tepper School continues to offer the world’s most costly online MBA education at $133,680. CMU is closely followed by Kenan-Flagler’s MBA@UNC at $124,345; the Ross online program at Michigan for $123,088; and Rice University’s Jones Graduate School of Business at $106,900.
Only two other online MBA programs cost over $100,000. They are offered by the University of Southern California and George Washington University.
UC Davis MBA Ranking
UC Davis touts their position at #24 in the Times Higher Education/Wall Street Journal ranking of MBA programs released in December 2018. But knowledgeable observers don’t take that ranking seriously. That’s because all but two of the M7 schools and many of the schools in the U.S. News and World Report Best Business Schools top 20 list declined to participate in the Times/WSJ project.
In the U.S. News and World Report Best Business Schools ranking, UC Davis weighed in at number 47. The Poets & Quants composite ranking, arguably the most accurate, placed the school at number 49. And the Financial Times rates UC Davis’s business school faculty number eight in the world.
2U’s Controversial Influence on Tuition
Some observers speculated that an online program management (OPM) partner agreement negotiated with the publicly-traded firm 2U likely inflated UC Davis’s tuition. Like UC Davis, some of the finest universities in the United States have accepted partnership offers from 2U, which maintains headquarters in the Washington, D.C. suburb of Lanham, Maryland. But in exchange, 2U requires a revenue sharing agreement, which asks schools to pay 50 to 65 percent of their revenue from partnership programs to the firm. 2U justifies such terms because the firm claims that it can cost as much as $10 million up front to create and market a single online graduate-level course.
As a result, 2U partner schools tend to charge premium tuition rates. For example, five of the seven online MBA programs that 2U powered in 2018 have tuition costs at or above $82,000. These include the programs at Kenan-Flagler and Jones, as well as at Syracuse University, the University of Denver, and American University. Less expensive programs operate at the University of Dayton and at Simmons College.
2U’s current flagship MBA program is at UNC, and that relationship accounts for about 10 percent of the company’s overall revenues. 2U needs UC Davis to perform at or above that revenue target to help offset a sudden reversal in the firm’s promising financial forecast.
In July 2019, 2U told Wall Street the firm projected losses for fiscal year 2019 between $152 and $158 million on revenue between $566 and $576 million. That range amounts to almost double what the firm projected just 13 weeks earlier. When that news broke, 2U’s stock nosedived about 54 percent overnight. The firm’s market capitalization, which had been $5 billion a year before, sunk to $850 million.
Part of the reason that 2U is losing money is that the company operates with an extremely high cost structure. For example, the firm had a $221 million budget for sales and marketing last year “to largely reach and recruit prospective students for its online programs,” according to Poets & Quants’ editor-in-chief, John Byrne. “That massive sum represented 54 percent of the company’s total revenues in 2018.”
UC Davis Capitalizes on its Proximity to Silicon Valley
Another University of California campus, UCLA, earned distinction years ago as one of the first institutions in the world to introduce a hybrid online MBA program. UCLA’s part-time curriculum supplements weekend class sessions in Los Angeles every three weeks with online instruction between classes.
Finally, a fully online MBA program will originate from Northern California, on Interstate 880 about an hour’s drive north of the world’s technology hub, the San Francisco Bay Area. Many have thought it curious that the region leading technological development for decades had not launched an online MBA program. But now, because the school understands that most online students live within 300 miles of a school’s campus, UC Davis seems to have geared their marketing efforts to both the Bay Area and Sacramento.
Dr. Robert Yetman, the MBA program’s academic director and the accounting professor who set up the first specialized master’s degree in accounting for the University of California system, told Poets & Quants:
Good grief, we are in Northern California and there really was no online MBA program in the cradle of technology. It seemed absurd. My point of view is what took us so long? We are sitting in the middle of one of the largest population bases in the country. We just want to be the best in our own backyard.
One unique feature of the Davis online MBA is that it appears to pay homage to the region’s history in pioneering the development of the internet. Plans call for Davis to extensively rely on live, synchronous classes—a technology only made possible by the Internet revolution.
Schools charging the highest tuition typically offer these live interactions. Using video, these courses enable online students to interact in real-time with their professor and classmates in an online course that meets at regularly scheduled times. Synchronous courses provide an online experience that can feel very much like that of on-campus programs and can encourage students and professors to develop relationships.
Only two other schools make use of live classes as extensively as Davis will. Indiana University delivers 60 percent of courses in synchronous live formats. Davis plans for roughly an equivalent percentage of all classes to go live—about half. Carnegie Mellon holds live 30-student classes two evenings a week for 70 minutes, a comparable amount.
2U online MBA programs tend to follow a consistent format. One element emphasizes these synchronous live courses. But in the 50 percent of classes that are available as on-demand videos, 2U also includes simulated discussion sections. Because 2U’s studio is in Los Angeles, students from the University of Southern California ask the UC Davis professors questions in these simulated classrooms.
Another element incorporates in-person immersions and residencies into otherwise fully online programs; all seven of the 2U online MBA programs require either two or three such in-person intensives. 2U coordinates many of the arrangements for these events on behalf of schools like UC Davis.
Davis plans to rely on a Silicon Valley site for one of the program’s three residencies, which will no doubt emphasize business principles relevant to the tech industry. Plans also call for a residency at a Napa Valley site, presumably to teach concepts that relate to the region’s wine, tourism and hospitality industries.