Wharton’s Big Gamble: Why Would Anyone Pay A Quarter Of A Million For An Online MBA?

At a time when higher education institutions are frequently criticized for the cost of their degrees, the Wharton School is making a  bold move by launching an online MBA program with an astounding price tag of $214,800.

Is it a tone-deaf gamble for Wharton which is pricing this Executive MBA program, 75% of which will be delivered via the Internet, at exactly the same price as its fully in-person Executive MBAs in Philadelphia and San Francisco? Or is it a smart strategic move, leveraging the formidable power of the school’s brand and the desire among more applicants for greater flexibility?

Either way, the decision by Dean Erika James for Wharton to become the first M7 business school to offer an online MBA is a new watershed in online learning. The program will be the most expensive online degree in the world, and Dean James is launching it as more people question the value and the return on investment of the MBA degree overall. When all is said and done, most of the students recruited into this program will end up paying a quarter of a million dollars or more for their online degrees, once you take into account interest on student loans and travel expenses for the 25% of the program that is in-person. And while there are no doubts about the quality of a Wharton EMBA, the school’s program couldn’t even finish in the top five in Poets&Quants’ recent ranking of the world’s best programs.


The pricing is counter-intuitive, if not insensitive to larger macro trends. Only this past week, for example, Northeastern University’s D’Amore-McKim Business School slashed the cost of its online MBA program, originally introduced in 2006, by $40,000 from $85,000 for its now retired legacy program. The highest ranked online MBA at Indiana University’s Kelley School is a third of the cost of Wharton’s, and Carnegie Mellon’s blended online MBA, which lasts three years (vs. Wharton’s 22 months) and boasts many in-person sessions, costs nearly $75,000 less. Thousands of students, many of them resembling the age and years of work experience of Wharton’s traditional EMBA candidates, are now enrolled in online MBA programs at the University of Illinois and Boston University where the cost of the entire degree is less than $25,000.

Here’s another way to look at it: Executives could take every single online course available from the Harvard Business School for the total cost of $33,250. For that sum, they would get 19 courses in everything from business essentials to leadership and management, entrepreneurship and innovation, financial and accounting, strategy, and business and society. The Harvard course titles are just as compelling, if not more so, than Wharton’s core curriculum because the courses have been designed to be essential business learning and each stands alone. A sample: Business Analytics, Strategy Execution, Negotiation Mastery, Design Thinking and Innovation, Disruptive Strategy, Global Business, Sustainable Business Strategy, Sustainable Investing, Leading With Finance, Alternative Investments, and Power & Influence.

What’s more, there is no better business education brand in the world than Harvard Business School which has put its very best professors in those online classes. Each HBS course delivers not only knowledge and skills but resume-worthy credit. HBS even instructs its online students on how to list their certificates and credentials from the school on LinkedIn and their old-fashioned written resumes. Take every single one of those courses for $33,250, or a mere 15% of the cost of Wharton’s new online EMBA. Sure, you are not meeting in live Internet classes or in residence sessions and you are not technically getting a degree. But at that price differential who’s to argue over the value proposition?

Or consider Harvard Business School’s mini-MBA for executives, its flagship executive education offering called the Advanced Management Program. For $84,000, the program provides four modules—two on-campus and two virtual, self-paced—over a six-month period. The program features six weeks of study on the HBS campus in the school’s luxurious executive education dorm. AMP grads, moreover,  earn entry into the HBS alumni database.


Add all this to the fact that when online learning initially became possible, most people believed that technology would make higher education more affordable and accessible to learners all over the world. While there many online options out there for cost-conscious consumers, many business schools in particular have put premium prices on the online versions of their MBA degrees, generally leveraging their reputations and rankings.

For almost all business schools, Executive MBA programs have, or at least are meant to have healthy profit margins. Wharton’s existing in-person EMBA programs on both coasts already brings in an estimated $50.1 million in total revenue annually. At the announced tuition rates, the first online cohort alone would bring an additional $15 million in revenue. In the second year, that sum. would quickly rise to $30 million in extra revenue every year.

It’s notable that the cost structure of online or blended programs is likely to be quite different from that of in-person programs.  Faculty salaries, the largest component of the cost, might be substantial up-front in a new online program because of course development, but the recurring faculty costs become considerably smaller than in-person programs.  So over some time, the online format is likely to have substantially higher contribution margins.


EMBA programs typically have lower academic and admission requirements than full-time MBA programs, though Wharton’s offerings are highly regarded and thought to be exceptionally rigorous. The unstated understanding is that a school’s reputation is shaped largely by graduates of full-time programs, and any negative reputational consequences of lower admission quality are more than offset by the excess revenue these programs generate.

While that increased revenue is enticing, Wharton will face several strategic challenges with its new program. For one thing, the school is making the bet that the online format will not substantially cannibalize its in-person programs in Philly/SF.  But the on-par pricing makes this a difficult proposition. If the educational content and experience is believed to be identical, why would anyone choose the 50 required Friday/Saturday trips to Philly/SF during the same 22 months, get affidavits from employers that they’ll get every other Friday off from work, and spend hours commuting when they could confine the residential components to a few modular weeks? 

For another, Wharton will inevitably confront the fact that students in both formats will want the flexibility of switching between the two formats at will.  To manage this flexibility, and avoid unexpected concentration of demand in one format or another, Wharton will have to impose some restrictive rules about when students can transfer and for how long.  It’s likely that the student flow will be greater from the in-person to the online format than the other way around, and Wharton is probably hoping to be handle larger capacity in their online electives than in classroom courses.  It will come as little surprise that some full-time MBA students will demand access to some online courses.


Another obvious challenge is that adding a cohort or two of students to an already huge student population will require more faculty resources.  Full-time students are likely to react adversely to both a perceived dilution of the Wharton MBA and the diversion of faculty from teaching the full-time MBA roster.

These are not inconsequential challenges to manage. And ironically, they become tougher if the program is a big success and grows into what Wharton hopes will ultimately lead to the recruitment and enrollment of two online cohorts a year.

A rival dean points out that the real question is why Wharton is doing it in the first place. “My hunch is that principal driver is the additional net revenue,” he says. “While they could also have increased the size of the full-time MBA program, I think at 850 they are already at a limit with respect to the quality they can sustain with the applicant pool. Adding 60 or 120 new full-time students will have a severely detrimental effect on the quality metrics of the MBA class. Those metrics are not made public for the EMBA classes.”

So is it a gamble or a sure thing? Whatever the answer, it’s a gutsy move and the most consequential decision in the first two years of the new dean’s leadership.


Questions about this article? Email us or leave a comment below.