J-Cast News takes a look at what brought about GEOS's bankruptcy and what's in store next. Here's a summary.
As is already known, G.communication will take over 70%, or 230 schools, of GEOS and close the remaining 99 schools.
In explaining how business went from bad to worse, GEOS executive Hitomi Suhara said that the collapse of Lehman Brothers (and the ensuing recession) resulted in fewer students. She said that GEOS was trying to cut 1.2 billion yen in costs (roughly $12.8 million USD) but was unable to do so due to the drop in revenue. A GEOS lawyer also said that the company had negotiated with its banks to extend loan repayments, but fewer students meant GEOS couldn't carry out its restructuring plans, and the company eventually ran out of money.
METI statistics show the drop in student numbers to be drastic. In February 2007, there were approximately 750 thousand students taking foreign language lessons. By 2008, the number was halved to 360 thousand. One factor in the decline is the kyuufukukin allowance to help people find work. It paid 40% of tuition fees up to 200 thousand yen. In October 2007, the allowance was cut to 20% or a maximum of 100 thousand yen. Then came the collapse of Lehman Brothers which forced many households to cut education expenses from their budgets.
From the ashes of the collapse of large eikaiwas smaller schools have emerged offering cheap lessons at around 8,000 yen a month. There are also Internet-based classes which are yet cheaper. While the large schools couldn't withstand the deflationary pressures on them, smaller schools are bound to take their place as the language market retructures.
There is the infighting at GEOS to consider. Management was split as to whether to file for bankruptcy, and ex-president Kusunoki has been adamant that the bankruptcy wasn't necessary to the point that he's trying to stop the bankruptcy and get his company back.
Whatever the problems within GEOS, they must have started long ago as the company went from accepting large, up front tuition payments to bankruptcy in the span of a couple of months. As the bankruptcy proceeds, it'll be interesting to see if what happened behind the scenes comes to light.
Comment: The first thing that came to mind was that J-Cast was equating the large schools to the dinosaurs. It's an apt comparison as the collapse of Nova and Lehman Brothers can be seen as extinction events that changed everything. There are new rules in play and the model of large schools charging everything up front is going the way of the dinosaur, making space for the small, furry schools to thrive.