Question number one - “Is HBS profitable?” The answer is yes. According to its annual report, HBS generates revenue of around $500 million and profits of $50 million each year. Not a small amount, and in terms of profitability and growth, its performance is comparable to that of well-rounded mid-size listed companies.
The second question is, “Is the HBS MBA program profitable?” Surprisingly, the answer is no. The world-renowned HBS MBA program is not making money – in spite of the expensive tuition, the two-year MBA program is actually losing money.
So, how does HBS make money? Looking at the breakdown of HBS’s revenue, you will find the majority (more than 80%) is generated by non-MBA entities.
The biggest source of revenue is the publishing business. HBS sells its case studies, books, and magazines, such as the Harvard Business Review (HBR), to other institutions as well as individuals. In 2012, HBS sold more than 10 million case studies, 1.5 million books, and three hundred thousand HBR.
The second largest moneymaker is the Executive Education Program. Targeting company executives, HBS provides a highly intensive education program, with approximately 10,000 company executives enrolling in the courses each year. Since the tuition is much higher than that of the MBA program ($14,000 for a week!!), HBS enjoys a huge profit from this business.
Other sources of revenue include donations and other philanthropic gifts.
So, what exactly is the key role of the MBA program when regarded as a business? It is branding. By producing 900 high quality products (students) each year, the HBS MBA program is spreading the school’s brand and its accompanying recognition into the market, thereby attracting new customers to other highly profitable businesses, such as publishing and Executive Education. The MBA program cannot stand alone, but HBS cannot live without the MBA program.
It’s an interesting business model, isn’t it?