Kaplan’s importance grows in keeping the Washington Post Company afloat

Further to our 8 April 2008 piece on Kaplan and the Washington Post Company (‘Pulitzer Prizes and the global higher ed industry‘), the news today reinforces the significant role of Kaplan in keeping the Washington Post Company (and its newspaper) afloat.  The press release is here, while a related story in the Washington Post newspaper puts it this way:

The Washington Post Co. today reported an 86 percent decline in third-quarter earnings compared with the same period last year, as a significant loss at the flagship newspaper offset gains at the company’s education and cable divisions.

For the quarter, The Post Co. had net income of $10.3 million ($1.08 per share) on $1.1 billion in revenue, compared with net income of $72.5 million ($7.60) on $1 billion in revenue in 2007.

The company’s newspaper division — which includes The Post, the Everett (Wash.) Herald and several community papers — reported an operating loss of $82.7 million for the quarter, largely resulting from a $59.7 million goodwill impairment charge at the Herald and the small papers, reflecting their diminished value. The loss also includes $12.5 million in accelerated depreciation of The Post’s College Park printing presses….

Kaplan Inc., The Post Co.’s education division, which now provides 53 percent of company revenue, reported $603 million in third-quarter revenue, a 17 percent gain over last year, and $51 million in operating income, a 36 percent gain over the same period last year.

The numbers above, and the Kaplan specific numbers below (from the press release), speak for themselves.

Kris Olds

The media, universities, and Higher Ed Cabinets: Or, why doesn’t Harvard buy the New York Times?

A potentially symbiotic relationship between the ‘quality’ media in the USA, and institutions of higher education, has been discussed from time to time in a variety of fora. Fiscal stress in the print media, for example, has led some to suggest that the well endowed (e.g., Harvard, with nearly $40 billion in interest generating capital) should rescue outlets like the New York Times, or actually facilitate the creation of a quality newspaper in Chicago (the Chicago Tribune is shockingly bad for a city of eight million). Instead, we see a significant component of the New York Times being sold off to Mexican billionaire Carlos Slim Helú last week, or the Washington Post dependent upon the profits being generated by Kaplan.

Yet quality newspapers play a critically important role in the higher education process, let along the broader socio-economic development process. Many professors (including myself) use newspaper articles in courses, and we require term-length newspaper subscriptions to complement more traditional readings. Newspapers are also important outlets for the circulation of knowledge that is produced in universities, and they help observers of the world of higher ed (including global higher ed) keep up on what is happening.

In this context, it is worth noting that the New York Times teamed up with the Chronicle of Higher Education today to host the USA’s:

first Higher Education Cabinet, comprising presidents, trustees and leaders from 76 colleges, universities and higher-education associations. The goal of the cabinet is to identify trends and direct discussions about the most pressing issues facing higher education today.

The first meeting of the cabinet will be held today at The New York Times Building. The welcome address will be given by Janet L. Robinson, president and chief executive officer of The New York Times Company, followed by remarks from Jeffrey Selingo, editor of The Chronicle of Higher Education. Topics to be discussed at the cabinet meeting included e-learning, internationalization [“Internationalization” – How will you compete globally?], financing models, assessment and accountability.

“The New York Times is committed to fostering discussion about the changing landscape of higher education,” said Felice Nudelman, executive director, education, The New York Times. “We are delighted to be hosting the inaugural Chronicle of Higher Education/New York Times Higher Education Cabinet meeting and look forward to continued opportunities to facilitate creative and collective discussions about the key topics in higher education.”

Today’s ‘Cabinet meeting’ is apparently the first of many (to be held on an annual basis), and will be supplemented by quarterly online meetings “conducted via the EpsilenTM environment, an e-learning and meeting platform”, which is:

the result of six years of research and development within the Purdue School of Engineering and Technology at IUPUI.  Epsilen Products and Services are commercially available through BehNeem LLC, the holding company created in Indiana to commercialize, market and further develop the Epsilen Environment. The New York Times is an equity and strategic partner in the company.

The bringing together of institutions of higher education and the quality general and higher ed media cannot help but generate positive benefits. Yet, I cannot help but wonder if the leaders of the many well resourced universities participating in this scheme – people focused on generating maximum annual returns off of endowments, or selling their innovative learning technologies like Epsilen to the media (or to universities and colleges) – reflected much, if at all, about the structural problems facing media companies like the New York Times Company.

Autonomy of university foundation offices and administrators aside, imagine if just a few of these universities decided to pool parts of their endowments, and preserve if not enhance the quality media in the USA, a country desperately in need of better news and analysis. So, instead of Columbia’s Bollinger working for the Washington Post Company, imagine if the Washington Post worked for Bollinger, or the Chicago Tribune worked for Penn’s Guttman, or the New York Times worked for Harvard’s Gilpin Faust. Not ideal, perhaps, but better than watching these important media firms get ravaged by the forces of socio-economic and technological change. But, might this be expecting too much of inward looking universities in the era of the marketplace?

Kris Olds

Developments in the world of private for-profit global higher ed

The private for-profit global higher ed world generated three news items of note this morning.

First:

LAUREATE EDUCATION, INC. ACQUIRES LEADING UNIVERSITIES IN MEXICO AND COSTA RICA

Baltimore, Maryland, July 8, 2008 – Laureate Education, Inc. today announced it has acquired the Universidad Tecnológica de México (UNITEC), one of the largest private universities in Mexico, and the Universidad Latina and Universidad Americana (UAM) in Costa Rica.

UNITEC has eight campuses throughout Mexico, including six in Mexico City, one in Guadalajara and one in Monterrey. The university has a 40-year tradition of providing higher education throughout the country, and today serves more than 36,000 students….

Universidad Latina, the largest private university in Costa Rica, was founded in 1989 and has more than 16,000 students. The university is widely recognized for its health sciences programs, including medicine and dentistry. UAM, founded in 1997, has more than 4,000 students, and specializes in business education. Combined, the schools have 13 campuses throughout Costa Rica.

Continue reading here…

Second:

APOLLO GROUP, INC. APPOINTS STRATEGIC AND FINANCIAL ADVISOR CHARLES B. EDELSTEIN AS NEW CHIEF EXECUTIVE OFFICER

PHOENIX–(BUSINESS WIRE)–July 7, 2008–Apollo Group, Inc. (Nasdaq:APOL) (“Apollo Group,” “Apollo” or “the Company”) today announced the appointment of Charles “Chas” B. Edelstein as Chief Executive Officer and Director, effective August 26, 2008. Apollo’s founder, Dr. John G. Sperling, continues to act as Executive Chairman of the Board of Directors….

Mr. Edelstein, 48, has more than 20 years of experience as a strategic and financial advisor. He joins Apollo Group from Credit Suisse, where he served as a Managing Director and headed the Global Services Group within the Investment Banking Division, as well as the Chicago investment banking office. Mr. Edelstein founded and oversaw Credit Suisse’s leading advisory practice in the education industry, where he served as advisor to many of the largest education companies, including Apollo Group.

Continue reading here…

Finally, the Wall Street Journal noted, today, that Marcus Brauchli, the former managing editor of the Wall Street Journal (now owned by Rupert Murdoch) will become the Washington Post’s new executive editor. The formal press release is here.

Why profile this topic? Recall that the Washington Post, despite its iconic status, is effectively being bankrolled by private for-profit global higher ed (aka Kaplan), as we noted in an entry titled ‘Pulitzer Prizes and the global higher ed industry‘. This point is reinforced in the Wall Street Journal:

But the Post has been struggling with the same forces that have devastated the newspaper industry in recent years — defections of readers and advertisers to the Web. Over the past 24 months, the paper’s weekday circulation has dropped 7.1% to 673,180, according to the Audit Bureau of Circulations. Print-ad revenue fell 13% in 2007, according to the Post. While Washington Post Co. has been somewhat insulated from the impact of these changes by its profitable Kaplan education business, the paper has lately taken steps to cut costs. It eliminated more than 100 newsroom positions, bringing the total newsroom count to about 700 from its peak of more than 900 in 2003. Some staffers worry that further cuts are coming.

These three news items are lenses onto three related development patterns:

• Diversification, dependency, and cross-subsidy via for-profit private higher ed (in the case of Kaplan).
• The extension of private higher ed networks into new ’emerging market’ geographies via the acquisition of private universities (in the case of Laureate).
• Financialization, with institutions of for-profit private higher ed reaching into the calculative networks that enable global higher ed value chains to be designed and brought to life (in the case of Apollo).

Given the scale of education services on offer via Laureate, Apollo, and Kaplan – over 2 million students being served right now – these news items and development patterns are worth taking note of.

Kris Olds

Pulitzer Prizes and the global higher ed industry

News that the Washington Post‘s excellent journalists just won six Pulitzer Prizes for journalism, including for Public Service, Breaking News Reporting, Investigative Reporting, National Reporting, International Reporting, Feature Writing, and Commentary, should serve to remind GlobalHigherEd‘s readers that the Washington Post Company is being bankrolled by Kaplan, by far the Post’s most profitable unit. Kaplan, for those of you who do not know, is a global education company, with approximately 50% of its revenue derived from the higher ed sector. It serves over 1,000,000 students per year in over 600 locations, and employs 27,000 staff according to Kaplan sources. The numbers below speak for themselves:

And in the Washington Post Company 2007 Annual Report, the company had this to say “to our shareholders”:

At The Washington Post Company, every single one of our businesses has dramatically changed over the past 15 years. In some cases, the changes were for the better.

Fifteen years ago we were accurately described as a media company. Over that time Kaplan has grown into a powerhouse, a multidisciplinary and increasingly international education business unlike any other education company in the world. For the last six months of the year, Kaplan’s revenue was almost half of the company’s, at 49%. Kaplan will continue to grow stronger in 2008. The Washington Post Company is now an education and media company (this isn’t “re-branding”; it’s reality), and the accent on education could get a lot stronger in the future.

On the media side, the financial and operational results at Cable ONE have been exceptional. Profits have bounded up during years when not all cable companies have performed as well. Customer service is at an all-time high in an industry not known for that quality.

Elsewhere in the company, the news is not as good.

This is a further sign of the increasingly significant role of private for-profit education at a global scale, and how higher education companies are perceived to be partial counter-cyclical mediators for revenue and profitability. However such trends cannot help but lead to the reallocation of capital away from the media (even despite such prestigious prizes), and towards education, at an intra-firm level.

Kris Olds

Xi’an Jiaotong-Liverpool University and Liverpool International College

As has been noted recently in GlobalHigherEd (link here, here, and here), a number of educational institutions in the UK, including the University of Nottingham and the University of Liverpool, are forging relatively deep linkages with China. In this context I interviewed Kelvin Everest, former Pro-Vice-Chancellor and current Deputy Vice-Chancellor of the University of Liverpool, about the university’s venture in China.

Xi’an Jiaotong-Liverpool University (XJTLU), located in Suzhou in China, opened its doors in September 2006 to approximately 160 students. Second year intake of students was 570, with an expected 900 for 2008. Currently, the university offers degree programmes in only four subjects: electrical engineering, computer science, financial mathematics and a combination of one or more of these with management. Four new programmes will begin in 2008, including finance with English and Biological Sciences. Degrees in civic design and town planning will be introduced in the near future. Two new buildings are currently under construction to support the anticipated expansion.

The initiative has involved a close partnership between the University of Liverpool and Xi’an Jiaotong University. The University of Liverpool also partnered with a large private corporation – Laureate Education Inc., based in Baltimore (a private provider of post-secondary education, with an income of $160 million in 2005). Laureate supplies online educational services and also owns a number of private universities around the world, with a global presence (see the figures below from one of Laureate’s Factsheets that is available on their Investor Relations site).

The company provided the £1mn bond necessary for the University of Liverpool to operate in China. To proceed, the new university required the permission of both the Chinese national government (Ministry of Education) and the provincial government in Suzhou. As the Changing Higher Education blog noted this year, China is clearly on Laureate’s radar screen after using Latin America as its launching pad.

The university is located in China-Singapore Suzhou Industrial Park, which has been built with money from the Singaporean government, as part of Singapore’s attempts to develop an ‘external wing’ of its economy, and embed itself in China. The industrial park is 84 square miles with factories and other facilities but mainly new production plants for huge multinationals – Siemens, Samsung, Volvo, Zanussi and so on – particularly electronic communications and transport. It has been described as a ‘hub’ for foreign investors, including 53 Fortune 500 companies, and reflects the Chinese government’s desire to build ‘local’ R and D capacity. At one corner of the park is the ‘higher education town’ and the plan is to build five or six universities there with connections to other countries. This will then generate a workforce that will populate the science park and partly address the enormous projected demand for skilled graduates in China.

All teaching and assessment at XJTLU is carried out in English – the perceived global language – meeting a widespread demand for English-language skills. However, because it is an ‘independent’ university, XJTLU does not come under the auspices of the UK Quality Assurance Agency for Higher Education and the University of Liverpool will not be directly responsible for quality or standards. The university is run by a board, whose members include the US company Laureate, the Suzhou Industrial Park and the Chinese partner university.

The University of Liverpool is hoping to receive several benefits from this overseas development. In the long run, the University plans to sell various ‘products’ to XJTLU on a consultancy basis (such as curricula, quality assurance mechanisms, staff development experience, and so on). So some income will be generated in this way. However, the main advantage comes from an assured annual influx of Chinese students. Historically, the University of Liverpool has received significant numbers of international students from China studying in the Management School and in engineering and computer sciences. There has been a concern, however, that competition from other universities (especially from expanding HE capacity within China itself) threatens the long term dependability of these flows.

Starting next year, students at XJTLU will complete two years of their degree course in Suzhou followed by 2 years in Liverpool (with reduced international tuition fees). A four-year programme in Suzhou followed by a Masters degree at Liverpool is currently being developed and is attracting much interest. These structures ensure a constant and anticipated influx of Chinese students into the Liverpool university system. Electrical engineering at the University of Liverpool already has 50/50 home/overseas students and the new intake would change the balance to two-thirds overseas. This influx of students would allow the university to sustain itself and to grow as an institution.

The historic and cultural links between China and Liverpool are also deemed important to this development. Liverpool is twinned with Shanghai and has a higher profile in China than it does in Europe. Clearly, this initiative involves a high degree of risk and uncertainty. However, when it comes to China, possibilities would seem to outweigh the risks.

In a separate but related initiative, in May of this year the University of Liverpool announced an agreement with Kaplan Inc., another global educational and career services provider with an annual revenue of nearly $1.7 billion, and emerging interests in both the UK and China. Kaplan, Inc., is a subsidiary of the Washington Post Company. The joint venture between Liverpool and Kaplan will establish an international college located on the campus of the University of Liverpool. The aim is to prepare international students for entry into the University’s undergraduate and graduate degree programmes. Subject to meeting defined academic and English language standards, students who complete their course at Liverpool International College will be eligible for undergraduate and postgraduate degree programmes at the University. Such colleges are already in existence in partnership with the University of Sheffield, the University of Glasgow and Nottingham Trent University.

Johanna Waters