The Washington Post Co. has put the ailing Newsweek up for sale, and its flagship newspaper is losing money, too. But the company is surprisingly profitable because of a shrewd acquisition it made more than 20 years ago.
In 1984, Stanley Kaplan -- who pioneered standardized test prep courses -- sold his business to the Post. Over time, that business has grown to include Kaplan University, part of the growing for-profit sector of higher education that is taking aim at community colleges and many four-year institutions, promising a more flexible learning environment and better job training.
Last year, according to the Post's annual report, Kaplan accounted for 58 percent of the company's revenue -- and it was profitable. Newspaper and magazine publishing accounted for only 19 percent of revenue, and those activities lost money.
This year, the financial magazine Barron's figured that The Washington Post Co. is worth about $8.5 billion -- and $5 billion of that value is from Kaplan.
Kaplan is in the education business -- a for-profit university. But Christopher Motz, the president of Kaplan University's Hagerstown, Md., campus, prefers a different phrase -- "market driven."
"In order to compete as the type of institution we are, we have to be more sensitive to the demands of the student," Motz tells NPR's Robert Siegel.
Kaplan University students pursue associate's and bachelor's degrees in health fields, in business and in criminal justice. There are also some master's degree programs. And while Kaplan also has campuses in Iowa and Nebraska, most of its 66,000 students study online.
Advertising Budgets And Federal Financial Aid
The Chronicle of Higher Education figures the for-profits account for between 7 and 10 percent of all students in American higher education.
Kaplan attracts students through national advertising. But the amount of high-profile advertising for the for-profits -- not just Kaplan, but Capella University, the University of Phoenix and others -- is a point of concern for their critics.
"At a for-profit college, if you look at some of the reports to the Securities and Exchange Commission, you will see that the advertising budget is immense … on par and even sometimes exceeding the instructional costs of the institution," says David Hawkins, director of public policy and research at the National Association for College Admission Counseling. His group represents traditional colleges and universities.
Another red flag in Hawkins' view is the degree to which Kaplan and other for-profits depend on federal financial aid. The Department of Education says a college may not get more than 90 percent of its revenue from those sources. According to its SEC filings, Kaplan is at 87.5 percent.
Also, Kaplan's owner, The Washington Post Co., is a publicly traded company, which raises questions about the pressure to be profitable at all costs.
But the president of the entire Kaplan University system, Wade Dyke, says the Wall Street connection is a plus.
"One of the benefits we have as a for-profit institution is we have access to capital, [so] we can be reasonably nimble as we respond to new technologies," he says. "I think our growth in online is an example of that."
Novel Feature: Decentralization
Dyke, who used to teach at Ohio State University, is based in Fort Lauderdale. And that's another novel feature of the for-profit, online sector: a degree of decentralization unthinkable in the pre-Internet age. The Kaplan corporate offices are in New York, the students are everywhere and the digitized library they can access is at the University of Alabama in Huntsville, Ala.
It's a very entrepreneurial take on higher education. And part of what is bought and sold is accreditation.
When Kaplan operated the Hagerstown campus as Kaplan College, it had national accreditation, which is legitimate, but considered less than the platinum standard of regional accreditation. Last year, when it absorbed the college into Kaplan University, the Hagerstown campus acquired the Midwestern accreditation that originated with the colleges Kaplan had bought in Iowa and Nebraska years earlier.
Motz says gaining that accreditation by being absorbed into the university meant both prestige and practical advantages for his campus.
Going to Kaplan is very much about getting a degree that leads to a job, or a promotion. Critics question whether the jobs you can get pay enough to cover all those student loans. But in today's labor market, they could say as much of just about any degree.