For the 44 to 24 percent of students who passed the course, this was not a failure at all. I don't see why they should be denied access to education because the likelihood of failing the course is higher. Online courses should be offered cheaper than regular on-site courses to take the increased risk into account, but that doesn't mean they should not be offered at all.
But if your customers don't understand the product then all bets are off and you have a moral (and, frankly, self-serving) responsibility to explain the product to them.
The way it sounds to me, SJSU and Udacity and are going to take the time to study the data and figure out why it is that so many students failed. If, and this seems pretty likely to me, it turns out that the students were confused about the product (the courses) then I would imagine that steps will be taken to clarify things so that people can make choices that will lead to the best-possible outcomes.
Many price points, many products doesn't work if people don't understand the products.
In the education market, customers do not know what they are purchasing by definition. This is why there is so much crap in the industry -- companies have an incentive to spend money on marketing rather than content.
The latest round of MOOCs are not really monetizing educational content (which is and has been online elsewhere, often for free). They are packaging institutional prestige, the same dynamic Facebook used to drive student adoption. Khan Academy is the exception.
A lot of the material on coursera isn't that easily available for free. The courses usually take a new and integrated aproach that you would see in a university course, created and presented by an expert instructor. I don't care for their prestige, but probably coursera is using the instutional prestige as a selection criterion, and it works, mostly.
I also think Udacity is more in between Khan Academy and Coursera, in that Udacity tries to find new ways of online instruction.
And I think showing that they fail people actually increases the value of the course. I'm always wary of non-free online courses provided by universities that have an extremely high pass rate.
The problem that most current US and UK 'educators' just don't seem to understand is that the customer analogy does not fit into the learning situation. Why? For the simple reason that it takes more than just having money to actually learn something.
Also, just because some people are unable or unwilling to absorb and understand some knowledge does not make that knowledge and the way it is presented invalid or useless.
So every time a course like this is canceled because "half the customers are rejecting the product", another nail is driven into the coffin of education.
I wonder how the Open University has dealt with that problem, after all they have been running distance learning courses for large number of students for over 40 years:
Institutions are beholden to political pressures. While idealistically their goal is to provide the most raw education, failure makes them look bad. They don't operate in a vacuum. Just like the rest of society, they are influenced by good people that want the most education for the most people and by complete shitbags that want to take the resources they consume. Institutions, unfortunately, have to provide education in a way that is defensible from criticism. The mere perception of failure is an avenue for attack even though everyone knows that most MOOC students will be casual and not fully committed.
Many price points, many products.