Koreans will endure just about any hardship to make sure they get into a top university. A degree from a leading school isn't just the key to a good job--it's a prerequisite for finding the right spouse and establishing high-powered connections that can last a lifetime. That has fueled rapid growth in the cramming industry, which takes in some $15 billion annually. The best schools charge upwards of $1,000 a month per subject--a small fortune in a country where the average annual income is $16,000. "I spend about half of my income on after-school cramming for my kids, and I'm no exception," says Kim Hyon Chol, the father of two high school students, after attending the Megastudy event, an information session designed to give parents tips on college admissions--and woo new students.
Megastudy has built a booming business by tapping into the anxieties of parents such as Kim. The cram school company burst onto the scene in 2000, offering videotaped lectures online. Today its Web site lists 2,000 courses such as "Super-fast skimming of English grammar" and "200 classical poems in 10 days." Prices for lectures, which can be viewed on pcs or portable video players, range from $13 to $120.
That adds up fast. Megastudy's online sales will likely jump 40% this year, to $65 million. The company has in recent years added classroom instruction, boosting overall revenues to $107 million, with profits of $38 million, estimates brokerage Hyundai Securities. By 2010, revenues could reach $300 million, and despite stiffening competition for Megastudy, Hyundai expects it to clock margins of nearly 40% for several years to come. Investors have learned to love the story, as Megastudy shares have more than doubled this year. "E-learning represents a tiny portion of the education pie right now, but its rapid growth will soon push it to the mainstream," says Chief Executive Son Joo Eun, who founded Megastudy after 14 years as a cram school history teacher.VARIED MENU
Megastudy's meteoric rise owes much to its popular lecturers. Son has signed up top talent by offering a 23% cut of online sales of videos--a deal that earned one English teacher $2 million last year. Korean high school students, who spend as much as 18 hours a day studying, appreciate the flexibility that Megastudy offers. "Instead of sitting in cram school for hours every day, I can choose the subjects I need to concentrate on," says Kim Jun Woo, 18, who is applying to prestigious Seoul National University. "And I can watch lectures by the best teachers, even though they're all based in Seoul," adds Kim, who lives 200 miles from the capital in the southeastern city of Gyeongju.
Megastudy's success in the virtual world has allowed it to dedicate more resources to real-world operations. The company has established up seven cram schools in Seoul and is even considering expanding to other Asian countries. "Online will soon be the main medium of learning," says Son, "but it will have to be complemented by face-to-face instruction." By Moon Ihlwan