What graduate education can learn from Blockbuster and Netflix

Technological disruption is a given, but success can be elusive

By Christopher “Chip” Paucek

It’s hard to imagine today, but, back in 2004, Blockbuster had over 9,000 stores globally, while Netflix was still a small DVD-by-mail business with 2.5 million subscribers. Fast forward to 2018. Blockbuster—and the DVD-by-mail business—are basically defunct, and Netflix no longer relies heavily on DVDs as part of its business model. Instead, Netflix has 125 million streaming subscribers worldwide and is transforming how films and television are produced in Hollywood. Instead of fearing evolution, Netflix embraced the future and its resulting story is one that paves the way for success for other industries—including graduate education.

Two critical things acted as catalysts for this innovation. First, as Reed Hastings, founder and CEO of Netflix, noted in a 2004 New York Times article—“More Companies Say, ‘The DVD Is in the Mail’”—his mail-order business simply represented “a dramatically better value for consumers” than Blockbuster DVD rentals (no astronomical late fees or empty shelves for new releases!). Second, and more importantly, advances in technology and mobile broadband enabled Netflix to create an even more compelling product for consumers: video streaming.

So what’s the lesson for graduate education? It’s not, as some might think, a cautionary tale of David coming to slay the university Goliath the way Netflix put Blockbuster out of business. To the contrary, the ed-tech graveyard is filled with upstart companies “destined” to disrupt universities and higher education. But rather than becoming disruptive blockbusters, they ended up shuttering like Blockbuster. The key insight in the Netflix story is actually a more subtle one: that innovation, fueled by technology and the internet, can deliver a better consumer experience and value proposition, while also enhancing quality and expanding access.

As the co-founder and CEO of 2U Inc. I know firsthand what it’s like to partner with great schools, including USC Rossier, to power the world’s best digital education. So I’m often asked for my opinions on the future of online education. Although I have many opinions on the subject, I’ll focus here on just one: like movie watching, all graduate education will—in some form—move online over the coming decades.

One inescapable constant we all face today is technological disruption; see the Blockbuster/Netflix example above. It affects every industry, institution and company as well as the way we live and work. To keep pace, lifelong learning has become a necessity, not a luxury. And, for many college graduates, that means returning to school, particularly in fields where additional education is a prerequisite for career advancement. For these working professionals, an online degree is a compelling and convenient option.

After all, why quit your job or rush across town after work to attend school when you can simply open your laptop, wherever you may be, to join an intimate, weekly live class or to watch a downloaded lecture taught by a great professor? Add in the fact that you don’t have to pay room and board, and you begin to see why the consumer experience and value proposition are so profound.

The benefits aren’t just for students. Universities and faculty also see positive impacts in the form of pedagogical innovation, a greater reach for mission and scholarship, as well as access to a more diverse and global student body. We see it every day in 2U-powered programs where the quality of teaching, retention rates and student outcomes are equal to—and, in some cases, better than—campus-based programs.

Let me close with this thought. USC was founded in 1880, four decades before the Walt Disney Company. Like Netflix, USC and Rossier have stood as unquestioned trailblazers in embracing digital innovation. Compare that to Disney, which just decided earlier this year to bet its future on building a streaming business to out-compete Netflix. So much for universities being the slow ones to transform and embrace change.

Christopher “Chip” Paucek is co-founder and CEO of 2U Inc., an education technology company that partners with colleges and universities to deliver online degree programs.