Applications: red ink at the SPA.

The Software Publishers Association recently unveiled a glitzy new Web page (www.spa.org), but otherwise the 12-year-old association seems to be lagging well behind its members in exploiting the Internet revolution. The predictable result: SPA revenues are shrinking and the association is now running in the red.

That's the overall trendline that emerges from the SPA's newly-released financial report for fiscal 1996 (ending in June). Worldwide revenues have dropped 9% over the previous year, from $10.8 million to $9.8. And instead of the hefty profits ("excess revenue over expenses" in non-profit jargon) that the SPA once produced, the bottom line for 1996 shows a 6% deficit. The decline might have been even more serious, says SPA chief financial officer Tom Meldrum. "We had budgeted for a worse loss than we incurred."

To be sure, a one-year loss barely puts a dent in the SPA's $7.2 million investment portfolio (equal to more than two years of membership dues). Moreover, the association seems to be scrambling to catch up again: The SPA has begun actively courting Internet startups, its research program is being overhauled to track electronic downloads, and more online topics are promised for next year's conference programs. But in the meantime, there are warning flags throughout the SPA's financial report:

* Membership: Revenue from membership dues crept upward by 1% in 1996, to $3.3 million (34%) of total SPA income, in part because the association more than doubled its membership promotion budget (from $385,000 to $737,000). But total membership "hasn't changed much" since last year, says Meldrum, when SPA enrollment included some 900 publishers (most with average annual sales of $1-$2 million) and 300 suppliers. In practice, that means the SPA now loses about as many members as it recruits--and often ends up replacing real software companies with disk duplicators and wannabees.

* Anti-piracy: The SPA's second richest source of revenue continues to be software piracy payments by big corporations, which last year contributed $2.9 million (30%) to SPA operations. That's the one major revenue line that grew significantly--by 18%--in 1996, and Meldrum says the growth reflects a new anti-piracy initiative in Asia. But the SPA's monopoly on anti-piracy continues to face competition from the Business Software Alliance, a rival group of software cops backed by most of the large business software publishers.

* Conferences: The SPA's two annual conferences, which produce 20% of SPA revenues, last year suffered a 19% drop in revenue (exclusive of exhibit and awards entry fees), to $1.9 million. Meldrum says declining conference attendance "is a concern throughout the association industry." So far, however, cost-cutting has kept ahead of declining attendance; in 1996, conference profitability actually rose to 54% of revenues, up from 50% in 1995.

* SPA Europe: The association's European office (which last year took in $956,000 against $1.4 million in expenses) continues to be a money-loser--in part because its annual conference on the French Riviera has been consistently unprofitable. Another reason for the losses, says Meldrum, is that hefty spending on European anti-piracy programs hasn't yet paid off: SPA Europe produced less than $18,000 last year from litigation settlements.

Tom Meldrum, CFO, Software Publishers Association, 1730 M St. NW, Washington, D.C. 20036-4510; 202/452-1600. E-mail: [e-mail].