Bertelsmann ventures into online education
01/16/2012
Bertelsmann is making its long-awaited foray into education as anchor-investor in a $100m fund that aims to form partnerships with universities and vocational schools to offer online study and other types of courses worldwide.
The German media group has put $50m (€40m) into University Ventures, run by a group of US private-equity specialists who hope to tap a growing market through six to 10 joint ventures with European and US higher-education institutions over five years.
The investment is small, but Bertelsmann deems the move potentially groundbreaking as it could eventually add a new-media business that capitalises on the possibilities of the web to its old-media interests. These range from RTL television to Random House books and are still grappling with the structural changes brought by the internet.
People briefed on the deal, which will be announced soon, said it had much in common with the 2009 BMG music-rights joint venture with KKR private equity. That move has given Bertelsmann the chance to re-emerge as a big music publisher through a modest investment in a highly scaleable business designed for the internet-age.
The new project carries the fingerprints of Thomas Rabe, Bertelsmann’s new chief executive, who championed BMG and KKR while he was still chief financial officer of a media group that in recent years has not made good on promises to gain a foothold in new growth markets driven by the internet and digitisation.
The deal – which began life under Mr Rabe’s predecessor Hartmut Ostrowski, who stepped down in December – shows a shift in strategic thinking at a company that tried to buy the educational publisher Thomson Learning in 2007 and eyed Houghton Mifflin Harcourt not long after to complement its books business.
Instead of going for another bolt-on acquisition in an established albeit changing market – where it would compete with the UK’s Pearson, owner of the Financial Times, or Kaplan of the US – Bertelsmann is targeting higher education, in which it reckons a fragmented roster of commercial providers is only beginning to make a mark.
Bertelsmann estimates that the commercial operators hold a third of a $1,000bn market and that rising demand for degrees – especially in China, India and Brazil – as well as the internet, and public austerity could see the sector grow 10 per cent a year.
One of University Ventures’ first projects is London-based Higher Education Online, which is scouting Europe for universities that want to offer courses online, but who do not have the capital, or feel they lack the business savvy, to do so.
Another is an offline partnership with Brandman University in California to lure Hispanic students – who are under-represented on linguistic grounds – with courses that are at first taught in Spanish and migrate to English as the bachelor course progresses. Bertelsmann believes demand for studying in English will be a big growth driver.
By Gerrit Wiesmann