South Korea: education innovation in free market for tutoring

Kim Sung-jae, a physics instructor, conducts a lecture that is filmed for use on the Internet. Photo credit Jean Chung for the International Herald Tribune.

More on the South Korean web-tutoring business in this piece in the NY Times Global Business 1 June, 2009. So far I’ve not found evidence of significant innovation beyond these two elements:

1. teacher performance

2. rewarded by as much as 23% revenue sharing

3. online video leverages the top performers into massive 50,000 viewer classrooms

None of my hoped-for technology innovations seem to have happened yet – probably because of the development investment required. E.g., learning software with interactive labs, simulations, tracking and guiding student progress.

Are these web-tutors effective at getting their customers into the top three Korean universities? Given the amount of revenue they are raking in their customers must think so. But in-person cram schools charge about five times as much as the web-based tutoring.

The top teachers are compensated by 23% of their course revenues (that’s how you get to $4 million annual incomes). At least that was the Megastudy.net comp rate in 2009. Following are excerpts from the NYT article:

SEOUL, South Korea — In the 1990s, Son Joo-eun was a success in South Korea’s hypercompetitive business of preparing students for the national college entrance exam. He had an annual income of 720 million won — the equivalent of $573,000 today — as a private tutor helping children from rich families in Seoul win admission to elite universities.

Then, he says, he had an epiphany: “What I was doing — helping the rich lift their children to the top of the ladder while pushing others down — was deepening inequality in education.”

In 1999, while watching a home-shopping channel on television, Mr. Son came up with the idea for an online test preparatory school. As South Koreans were embracing broadband Internet, he thought: why not bring classes into the home, too?

He turned to the Web to provide “an honest, inexpensive education available to everyone,” and South Korea’s multibillion-dollar test preparation industry has never been the same.

Megastudy.net, the online tutoring service Mr. Son started in 2000, may be the perfect convergence of South Koreans’ dual obsessions with educational credentials and the Internet. In this country, where people’s status and income at 60 are largely determined by which college they entered at 18, South Korean parents’ all-consuming task is to ensure that their children enter an elite university. And that requires a high score on the college entrance exam.

By tapping into those anxieties, which deepen during recessions, Megastudy has become South Korea’s fastest-growing technology company, with sales expected to grow 22.5 percent this year, to 245 billion won ($195 million), even as the country’s economy is projected to contract.

About 2.8 million students, including approximately half of all college-bound high school seniors, are members of Megastudy, which allows them access to some of the country’s most celebrated exam tutors. For a fraction of what they would pay at traditional private “cram schools,” students can watch video-on-demand tutorials on home computers or download them into hand-held devices for viewing in the subway or parks. They can skip or fast-forward through some parts of a lecture and bookmark or repeat the rest.

(…) Last year, South Korea spent 55 trillion won, 6 percent of its gross domestic product, on public education. But private education expenditures amounted to an additional 20 trillion won, a burden that has been cited as a factor in South Korea’s low birth rate. Eight of every 10 students from elementary school through high school take after-school classes from private tutors or at cram schools, online or offline. Offline cram school courses cost up to five times as much as their online counterparts.

(…) Online commercial services like Megastudy charge a relatively small fee, averaging 40,000 to 50,000 won ($30 to $40), for each course a student selects from thousands of online tutorials. But as they grow bigger and more commercialized, schools like Megastudy create a new divide in education, this time on the Web, said Yang Jung-ho, a professor of pedagogy at Sungkyunkwan University in Seoul.

(…) To compete with the free online schools, Megastudy hires teachers with followings that rival those of pop stars. Some teachers lose their contracts if their popularity ratings drop. Last year, one Megastudy teacher generated 10 billion won (nearly $8 million) in online sales and pocketed 23 percent as his share.

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