It would clearly be cheaper and more convenient to just unroll your yoga mat in your living room and work out while watching yoga videos.
The answer that pops into my head is "pre-commitment." When I think of yoga stretching (let's ignore the mental/spiritual aspect for this post), I think of something that would be very good for me but would be very boring. If I paid ahead of time for 8 weeks of classes, I would push myself to go. If I just had a video sitting around, I probably would not use it.
Take this as a correct model of my behavior. Does it generalize to the median student attending, say, George Mason or the University of Maryland? Perhaps these students look at a college course the way I look at yoga--as something that is good for them but is very boring. It seems plausible to me that these students might not be able to motivate themselves to watch videos of lectures. But once they make it to class, they go ahead and pay attention...somewhat.
This is a bit like Tyler's "ogre" model of in-person education. However, the ogre is not the professor or the yoga teacher. It is the part of you that pre-committed by signing up for the course.
If that is true, then online educators will have to come up with a pre-commitment strategy that substitutes for high tuition.
Meanwhile, I have read several stories about Coursera (including this one), which seems to operate under the assumption that the key to success in online education will be Ivy League instructors, rapid feedback, and peer interaction.
I have my doubts about the Ivy League instructors. I assume that they are devoting very little of their time and energy to this. Eventually, folks who are willing to put close to 100 percent of their bandwidth into online education should be better at it than the folks who put close to 0 percent.
Peer interaction? I'm agnostic. Is one of the factors that make students motivated by a live classroom the fact that they are constantly looking around and comparing themselves to peers? Someone should study this.