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Bubble in Higher Education: When Will It Pop?

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Bubble in Higher Education: When Will It Pop?

Bubble in Higher Education: When Will It Pop?

The Chart of the Week is a weekly feature in Visual Capitalist on Fridays.

The soaring bull market in higher education has been flying high for some time.

Many factors combined to make it the perfect storm: the demographic rise of the millennials, easy money from the Fed, the “Chivas Regal” effect in pricing strategy that many colleges and universities adopted, and the US government virtually taking over the market for student loans.

It’s a vicious circle as colleges raise prices, students take out easy loans, and the institutions raise prices again. However, it all seems to be coming to a head as several factors begin to show the chinks in the armor.

First, the US Federal Government now holds close to 45% of its total financial assets in student debt. This does not include things like land or the any of the Fed’s assets, but it is still extremely significant. Pre-crisis, it was only about one-third of those levels at about 15%.

The main reason for this increase is that the government seems to be the only organization backing student loans. Before the Financial Crisis in 2007, the government only owned $100 billion of student debt – now it owns over $800 billion.

Next, the delinquency rate has risen rapidly over the last decade. Even the St. Louis Federal Reserve branch is becoming concerned with this. In their research article from April 2015, they write: “A delinquency rate of 15 percent for all student loan borrowers implies a delinquency rate of 27.3 percent for borrowers with loans in repayment.”

The problem is that real wages aren’t increasing, and many youth are left unemployed or with low paying jobs. With an average debt load just short of $30,000, it is no wonder that graduates are still struggling.

Lastly, colleges are starting to run into problems making ends meet and often institutions are going bankrupt. Particularly at risk are for-profit colleges with low prestige, as well as liberal arts colleges. Corinthian Colleges agreed to sell or close 107 campuses, leaving 72,000 students in the dust. Sweet Briar College has been in a potential bankruptcy saga for months. Even Louisiana State University is in the middle of drawing up its bankruptcy plan.

In the end, it may be technology may be what truly blindsides schools and students. The cost of an online degree (or even self-education) is a fraction of the cost, and colleges and universities are becoming less relevant every day. Big names such as Peter Thiel and James Altucher have been outspoken skeptics of higher education for years.

This college frat party could be coming to an end soon. The question is: who will end up paying for the kegs?

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Visualized: The Esports Journey to Mainstream

This infographic plots the journey of esports, from underground niche to a billion-dollar mainstream phenomenon—and it shows no signs of slowing down.

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Visualized: The Esports Journey to Mainstream

Although esports might seem like a relatively new phenomenon, its origins can be traced all the way back to the 1970s.

It was only in the past decade however, that a wave of technological innovation transformed the entire industry from an underground niche into a billion-dollar mainstream phenomenon.

Today, the nascent esports industry competes with some of the biggest sports leagues in the U.S., while global tech giants hastily invest billions of dollars to make their mark in what many consider to be the future of sports and entertainment.

How did it evolve into the industry we know today—and more importantly, will it maintain its furious pace of growth?

The History of Esports

Electronic sports (or esports), are organized, multiplayer video game competitions commonly played by professional gamers. Since its inception, the industry has continued to exceed expectations and reach new milestones every decade.

Note: The timeline of events are an abridged version of major achievements in the industry.

1970s: The Birth of Esports

The earliest known video game competition—the Intergalactic Spacewar Olympics—took place in 1972 at Stanford University. The winner of the event received an annual subscription to Rolling Stone magazine.

While it was a modest first prize for the industry, it would set a foundation for future prize pools in the millions of dollars.

1980s: More Gaming Options

The 1980s ushered in better consoles for esports. The Nintendo Entertainment System (NES) took graphics, controls, gameplay, and video game accessibility to the next level.

Five years later, the Sega Genesis console was released in the U.S. and Japan to compete with Nintendo—which held a 95% market monopoly at the time.

1990s: The First Tournaments

Nintendo increased its commitment to esports by hosting the Nintendo World Championships. After touring 30 cities in the U.S., the finals challenged players to games like Super Mario Bros. and Tetris, with a 40-inch TV awarded to the winner.

Developers and gaming entrepreneurs created a flurry of leagues, including QuakeCon in 1996, followed by both the Cyberathlete Professional League (CPL) and the Professional Gamers League (PGL) in 1997.

In just a few years, these competitions helped esports gain significant traction.

2000s: The Explosion of Esports

Esports fully burst into the mainstream with Amazon’s acquisition of Twitch for $970 million in 2014. The live video game streaming site gave esports a platform to reach previously unthinkable heights, with popular games like League of Legends (LoL) and Defense of the Ancients 2 (Dota) receiving millions of views.

In 2019, Google followed suit with its Stadia streaming service. The cloud-based video game platform aims to eliminate the need for hardware, allowing Google to aggressively compete in the esports space.

A Snapshot of Esports Today

The increasing involvement of developers and global tech giants has not only increased the audience size of esports—it has also led to bigger prize pools, and larger scale competitions across the world.

  • Demographics: 50% of esports viewership now comes from Asia.
  • Engagement: 6 billion hours were dedicated to watching esports in 2018, and will continue to grow to 9 billion by 2021.
  • Buy-in: The price of one of the 12 Overwatch League teams for sale in 2017 was $20 million.
  • Incentives: The Fortnite competition prize pool for the 2018 season was $100 million—equal to the entire esports prize pool in 2017.

It’s clear that esports continues to attract rapidly growing audiences at an unprecedented rate. However, there are still significant barriers inhibiting the industry from reaching its full potential.

The Future of esports

In order to maintain its furious pace of growth, the esports industry must first address five key challenges:

  • Diversity of game genres: The industry will need to produce more game genres in order to appeal to a wider audience outside of its current player base.
  • Geographic expansion of leagues: esports will need to expand to national, regional, and global levels if it wants to tap into bigger advertising budgets. However, while esports gains attention from global media, local events are more difficult to organize.
  • Regulation of competitions: With multimillion-dollar prize pools at stake, new rules and regulations are needed to combat cheating and match fixing.
  • Ownership of media rights: Content rights have not been a focus for publishers, as fan-generated content has served as free advertising for their games.
  • Media alignment: Traditional media brands are still reluctant to associate themselves with esports, as prejudices against competitive gaming still exist. For example, gaming culture is viewed as a harmful distraction, rather than a legitimate sport.

In less than 50 years, esports has evolved into a dominant form of entertainment today, eclipsing film and music industries by a wide margin. With an increasingly mainstream audience, the industry’s popularity and profitability shows no signs of slowing down—despite the challenges it faces.

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Visualizing the Rise of Investment Tech

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Visualizing the Rise of Investment Tech

For the high resolution version of this infographic, click here.

Investors and wealth managers are always looking to capitalize on their investments—and the latest innovations are arming them with more efficient tools to get there.

Fintech solutions are increasingly being adopted among the digitally active population, as 64% of surveyed wealth managers consider digitization essential in 2019.

Today’s graphic from Raconteur highlights the benefits of investment technology, and touches on shifting sentiments in human vs. digital interactions. Where do investors and wealth managers see the next epoch of investment fintech heading?

Fantastic Features: Top Benefits

According to a TD Ameritrade survey of 1,000 investors, a whopping 90% consider getting tailored investing advice to be the most important feature of any tech tool. In second place, 52% place value in easy access to their data.

Here are the other benefits at top of mind for investors when it comes to investment tech:

  • 45% seek the best possible returns
  • 44% look for customized, quick, and simple analysis
  • 39% are interested in customized portfolios
  • 39% want the benefit of personalized budgets
  • 38% desire regular suggestions for optimizing financial health

But how well are these applications being adopted in everyday investment scenarios?

The Fintech Boom by the Numbers

Investment apps such as RobinHood have drastically risen in popularity, but still lag behind more mainstream segments in the fintech space:

Fintech Categories Ranked by Adoption Rate, 2015 to 2019

Category2015 Adoption Rate2017 Adoption Rate2019 Adoption Rate
Money transfer and payments18%50%75%
Insurance8%24%48%
Savings and investments17%20%34%
Budgeting and financial planning8%10%29%
Borrowing6%10%27%

Source: EY

Borrowing apps have the lowest global usage rates—only 27% of the digitally active global population—whereas nearly 75% have adopted money transfer and payment apps.

Human vs Machine: The Customer Experience

Do humans or machines have the edge in managing your investments?

The aforementioned survey by TD Ameritrade also asked investors which of the following are performed better by each group, with mixed results:

👨 Humans perceived as better  🤖 Robots perceived as better
• Ability to chat about questions or investment concerns• Info in one place that can be accessed at any time to inform best solutions
• Investment experience
• Best returns
• Affordable investment solutions or advice
• Ability to optimize returns and minimize taxes
• Regular suggestions on how to optimize financial life• Quick, simple analysis tailored to unique financial situation
• Personalized budget development• Custom portfolio with regular updates

When it comes to managing tasks such as calculations, updates, and portfolio optimization, the majority of investors consider a computer to be better suited to the tasks at hand. However, when they are discussing investment concerns, personalization, or financial advice, the majority of customers prefer a human opinion.

Interestingly, 81% of U.S. investors believe that investment technology could never replace the “human touch”, compared to 70% of European investors or 64% in Asia.

Wealth Managers are Going Digital

Over time, wealth managers have grown to embrace the digitization of their industry.

The proportion of surveyed high-level executives who see digitization as essential to the industry jumped from just 25% in 2016 to 64% in 2019.

In another recent survey about views on most impactful types of fintech apps, more than 68% of wealth managers agreed that robo-advisors are among the most important developments, with AI-based investing apps following closely behind at 45%.

Towards a More Personalized Future

At the end of the day, investors want better, more personalized advice at their disposal—and for that advice to generate more profitable returns. Along with their wealth managers, investors are increasingly interested in solutions that can simplify portfolio management.

Digitization and automation of manual processes have been a welcome change for many industry professionals. While investment technology is still in early stages, wealth managers can personalize investor experiences through the adoption of tech─and increase their chances of future success by maintaining a seamless customer experience.

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