The economics of iTunes U

iTunes U has been around for a while in the desktop iTunes app, but the new iPad app is awesome. There are some interesting courses taught by great lecturers at top universities. The quality of the video lectures that I checked out is very high.

The courses are free, so I assume the universities are not making money from iTunes U directly. So why are they doing this? Places like Stanford and Yale are capacity constrained – there are many more students who want to go there than can be accommodated. So their demand is high, and offering free courses in iTunes U probably isn’t going to bring demand down to the point where the capacity constraint no longer binds. This is because the iTunes U courses don’t give you any kind of diploma and you can’t get feedback on your homework.

So there’s not really any revenue loss for the university, and they get some nice publicity and a feel good factor. But for a less famous university that isn’t really capacity constrained, the effect on their demand could be more significant. So I expect to see mainly famous universities offering these online courses, as long as they are free. The happy side-effect is that this should also maintain the high quality of courses in iTunes U.

In the longer term I can easily see a charging model arise. Some of the courses I’ve sampled are so good that I would gladly pay around the same amount that I’d pay for a textbook. I’d pay even more if I could interact with the teaching staff.