Association publishing: no get-rich-quick scheme.

Publications produced by corporations and those produced by not-for-profit associations have one thing in common-in most instances they are paid for by the sponsoring organizations. In other words, they don't generate sufficient revenue to cover their expenses. In that significant respect they differ from their commercial counterparts which quickly would go out of business if they did not sell enough advertising space or subscriptions to cover their costs.

While the corporate publication that generates revenue in any amount is the rare exception, about one in five association publications earns sufficient revenue to cover its expenses, and some even return a profit to the association.

IABC recently conducted a study of US-based association publications large and small and in varying formats. It found that the majority lose money, and in fact are subsidized by dues income in order to operate. Starting a publication with the intention of making money soon-and we're talking decades here-would be a big mistake.

It's important to point out one major difference between association publications and standard commercial ventures: association publications provide a number of services to members including:

* regular communication which would have to be accomplished some other way if the publication didn't exist,

* a means of marketing association services to members,

* a means of marketing memberships to prospects.

Because association publications provide these services, they should be, and are, measured by different financial criteria than strictly commercial publications. However, for purposes of this study we confined our investigation to profit and loss much the way a study of strictly commercial publications would.

Even considering the differences in purpose between commercial and association publications, some of the latter do make money. So, we set out to discover who is making money in the association publishing business these days and how are they doing it. Of the 125 respondents in our survey, only 28 (or 22 percent) operated in the black.

Association Publications Have Staying Power

So what does seem to be the secret of financial success in association publishing? The single factor that most clearly separated the moneymakers from the money-losers was the length of time they've been in business. More than half of those publications showing a profit have been publishing more than 50 years, and 86 percent of them have been around for more than 20 years. Of the money-losers, the majority (almost 50 percent) have published less than 20 years. Only 18 percent have published more than 50 years. So much for the idea of starting a magazine to add to the short-term profits of an association. It clearly is a long-term investment.

Comments by respondents underscore the resiliency of association publications:

"Fifteen years ago the Digest had a serious deficit and we almost discontinued publication. We had a massive editorial and philosophical overhaul, and today it is very profitable." Those comments were from an agricultural association publication going to more than 100,000 people and published for 50 years.

* A comment suggesting the tenacity of association publications came from a magazine published for 90 years ... "Our revenue exceeds our expenses in 1990-for the first time in 20 years."

* And from the food services industry, editors of a magazine published for 57 years said, "We came up with a 65,000-$95,000 profit yearly for the last seven years. Before that we operated in the red."

How Much Do Them Publications Make?

In the associations we surveyed, the spread was considerable. On the low end was this publication going to the construction trade: "We set ad rates only to cover expenses. The publication makes less than $1,200 a year."

And, on the other end of the profit spectrum, is a healthcare book in Chicago which shows revenues of US $2.9 million and expenses of $1.6 million (not including salaries). Unless this staff of five to 10 people earns considerably more than the editorial norm, the magazine turns a tidy profit.

Another healthcare magazine in Illinois makes a profit in the $400,000 neighborhood; one in Virginia, going to manufacturers, earns $100,000 a year; one in the oil business in Texas earned $35,000 last year; a St. Louis service club magazine posts a $100,000 profit; a healthcare publication in Sacramento earned $40,000 profit last year; and about the same amount for a Milwaukee social service association.

At the lower end is a San Francisco magazine in the construction field squeaking into the black by a mere $1,000. Doing better in San Francisco is a healthcare book turning a $20,000 profit; in between those figures is a magazine going to members of a financial association which posts a $7,816 profit.

In what we hope is not a harbinger of the future, an Oregon medical society reports a 3,000-$4,000 profit this year compared to $32,000 in 1989.

Most Money-Makers Have Big Budgets

Of the 28 publications we surveyed that make money, 50 percent of them had revenues greater than $500,000 a year. By comparison, only 11 percent of the money-losers had revenues greater than $500,000 a year. In other words, the magazines that show a profit tend to be big-time operations. We can infer from this that it's tougher to produce a small-scale profitable publication.

The most frequent budget size among the money-losers, (almost half) was under $100,000 yearly, making them somewhat small-time operations. By comparison, only 25 percent of the publications operating in the black had expenses under the $100,000 figure. With expenses below the $10,000 figure--specially when offset by some amount of revenue-governing boards can more easily dismiss deficits from the money-losers as a cost of membership. However, it is interesting that about 20 percent of publications in all formats that lose money have expenses in the $250,000 to $500,000 range.

We conclude from these responses that the profitable magazines tend to spend more money to bring in more money. The money-losers spend less, but bring in less. This is not to say that spending more will automatically create profitability, because those additional expenses must generate revenues over and above the investment for profit to result.

Magazine Format Heavily Dominant

Another constant of those publications operating in the black is that virtually all of them appear in the magazine format, and the vast majority publish monthly. None of the moneymakers use the newsletter format. Three of the 28 appear as tabloids.

Among the money-losers, the magazine format also was most popular (69 percent) but newsletters were a much closer second choice (23 percent). Tabloids represented about eight percent of those operating in the red.

Indeed, the preference for standard magazine format could be a key ingredient for profitability. For all their sameness, the 8-1/2-x-11-inch magazine format hooks reap savings in printing, binding and mailing by adhering to industry standards. They enjoy minimum waste in printing on the expense side, and the comfortable and consistent size and format helps sell advertisers, thus adding to revenues. Newsletters are not a good format choice because they offer little space for ads. Of course, format is not the only ingredient for making a profit in association publishing-we know that because magazines were a popular format choice for the money-losers, too.

Monthly Frequency Favored by Profitable Books

Clearly, the profitable publications did not choose to economize by printing less frequently than once a month. Seventy-five percent appeared monthly, compared to about 50 percent of those that lose money. Money-losing publications were almost three times as likely to print every other month than those that made money (25 percent vs. nine percent).

The monthly frequency helps boost annual revenues from both advertising and subscriptions. You can get twice as many ad pages into 12 issues as you can into, say six, so long as the magazine is the same total number of pages in both cases. Many advertisers also like the monthly frequency in order to build image awareness in readers' minds.

So long as revenues exceed production and distribution costs on each issue, publishing more issues brings in more money. Of course, the opposite is true if costs exceed revenues, and in that case, you would wind up with a better bottom line by cutting frequency, as long as you continued to achieve the same economies of scale on expenses, and your advertisers stuck with you in the less frequent book. The latter is especially tough to predict. Cutting frequency will usually weaken your position in the market unless you offset the cut with other changes in the less frequent book, such as more pages, more compelling subject matter, better graphics, and the like.

Circulation Size Not Much of a Factor

Conventional wisdom in commercial publishing dictates that a publication needs a large circulation to dominate its market. However, more than 50 percent of the profitable magazines in our study mailed to lists of fewer than 10,000. Only 7 percent mailed to more than 500,000. About one-third had circulations between 10,000 and 50,000.

Relatively small circulations help keep expenses down, especially with postage increasing as a cost of publishing.

Large circulations, however, were not much of a factor in losing money in association publishing either, since more than half (55 percent) of the money-losers had circulations under 10,000. Only five percent of the publications operating in the red had circulations over 100,000. Forty percent of those losing money had circulations between 10,000 and 100,000.

The majority of publications polled in our survey mailed to lists of 10,000 or fewer people-that includes those operating in the red and in the black. Circulation size does not seem to be a significant factor in determining the profitability of an association publication, and indeed, small circulations (under 10,000) clearly are the rule rather than the exception in association publishing.

Who Sells Ads Doesn't Matter Much

In exactly half of those publications operating in the black, staff has exclusive responsibility for ad sales, compared to about 60 percent among books that lose money. Another 25 percent of profitable publications use both staff and outside reps, while only about 15 percent of those losing money use both staff and reps. About 25 percent of the profitable books use reps exclusively; about 20 percent of money-losers do. In the survey, approximately seven percent of respondents whose publications lose money reported that they don't sell ad space.

What's the Staff Size?

How many people does it take to produce a profitable magazine? Well, 16 of the 28 (57 percent ) we surveyed operated with a staff of five people or less. Nine respondents employed from 5 to 10, and just three of the 28 had more than 10 people on the job.

By comparison, in more than 75 percent of those publications that lose money, staffs consisted of fewer than five people. Thirteen percent had staffs of 5 - 10 people, and 9 percent had 10 or more. Thus, we tend to find that profitable magazines have slightly larger staffs than those that lose money. Are " Upset with Deficits? The clear majority (59 percent) of boards at associations publishing newsletters are not concerned about deficits. At magazines, about half (51 percent) are mildly concerned, but 39 percent are not concerned at all.

The most serious concern we see expressed by boards is with the tabloids. While the sample is small-only eight tabloids-two of those eight (25 percent) report that their boards are seriously concerned about the deficit. Most of the tabs ( 63 percent) have expenses under $10,000 a year, but one costs over $500,000. Interestingly enough, the board of that tab's association is not seriously concerned about the publication's deficit, although it is "mildly concerned." Three of the tabs (38 percent) report their boards are mildly concerned about their deficits, and three are not concerned at all.

In the magazine format, of the 67 magazines we sampled operating in the red, only 10 percent caused serious concern for their boards. Some 51 percent are mildly concerned, and 39 percent are not concerned at all. Associations are spending a good deal on these money-losing magazines: 45 percent have expenses exceeding $250,000 a year, and 22 percent have expenses over $500,000. Thirty-nine percent of the magazines have expenses under $10,000.

Newsletters' deficits cause association boards the least concern of the publications we surveyed: 51 percent were not concerned about the deficit. Part of the reason is that a full 91 percent had expenses under $ 1 0,000 a year. Mild concern was expressed by 36 percent of boards. Fewer than five percent felt serious concern.

Comments regarding the deficits frequently went like this: "Magazine is in the black if dues allocation is included." Or, "Budget balances with subsidy from membership dues."

The respondent reminded us that "the IRS is watching closely to see that non-dues income is recorded correctly. Could be taxed. We are now competing with free enterprise for ad dollars."

* And another shifted responsibility for the deficit to the board: "Board has set limit of 25/75 ad/edit ratio. They know deficit is their own creation."

Conclusion

We found that most association publications lose money on a straight expense/revenue basis. But since they provide services to the membership, a percentage of dues should be allocated to the publication's income. If your publication isn't receiving such an allocation, it should be.

Additionally, and it comes as no big surprise-it's profitable to be in the healthcare business. Most of the moneymaking magazines (36 percent) are in that field. It is, however, somewhat surprising that the profitable magazines don't have particularly large circulations (54 percent under 10,000). And, they don't have big staffs (57 percent under five people) to produce a monthly that operates in the black. Their staffs, however, are slightly larger than those that lose money. Most important, we find that most of the profitable publications have been around for a long time (54 percent more than 50 years).

So, if your publication is one of the four out of five that doesn't pay its own way without help from members' dues, ask yourself how long you've been at it. Our responses show that your board is not likely to be too upset by a deficit, especially if you publish a newsletter. And, if your publication is under 50 years old, show your board that your deficit-ridden publication clearly is in good company. Perhaps most important, remind them of the critical services your publication provides to members, and that those services necessarily cost some of the dues dollars it helps generate in the form of new and renewing members.

Cliff McGoon, formerly publisher of Communication World, now heads his own consulting firm.

ADS IN CORPORATE PUBS...WHY NOT?

When the economy begins to falter, corporate communicators look for ways to shore up their publication budgets, which frequently have plenty of expenses but not much in the way of revenues.

Corporate publications could conceivably sell ad space the same way, association or commercial publications do. Most corporate communicators, however, view the idea of selling ads with about the same enthusiasm as they do tax audit or root canal.

"We've got enough to do without taking on a whole new load of work," goes the usual refrain.

Others balk over possible policy problems such as how to turn down advertisers that someone feels are unsuitable for the audience. Other editors simply don't know how to begin and aren't particularly interested in finding out. Also, some advertisers might be inclined to influence the editorial message.

If company publications were to accept advertising--and a few have over the years, such as Texas Instruments' Dallasite and Ford World--they might give rise to a whole new genre of sponsored literature. If they were to become Profit centers to their organizations, the editors might* realize greater leverage in battles over balanced reporting, candor and other issues which limit the edirotial effectiveness of their publications.

Perhaps association publications might serve as a suitable model.

Profile of a Profitable Association Publication

Typical profile of an association publication that operates in the black is a healthcare magazine published monthly by a staff of fewer than five people. The magazine has been published for more than 50 years and has a circulation of under 10,000. Ads are sold by staff and contribute to an annual revenue in excess of $500,000. Expenses also exceed $500,000.

*Format: 86% Magazine 11% Tabloid 0% Newsletters

Frequency: 75% Monthly 11% Quarterly 7% 6x year 7% 9x year

Staff size: 57% Under 5 32% 5-10 1 1% 10+

Circulation: 54% Under 10K 32% 10-50K 7%50-100K 7% 100K+

Years published: 54% 50+ 14%20-50 14% Under 20

Ads sold by:50% Staff only 25% Outside reps only 25% Both

Expenses: 36% $500K+ 25% $100-250K 25% Under $100K 7% $250-500K

Revenues: 46% $500K+ 36% $100-250K 11% Under $100K 0% $250-500K

Type of business: 36% Healthcare 11% Real estate 11% Finance 7% Insurance 7% Environmental 38% Other

* Percentages don't always add to 100 since not all respondents answered all questions

Profile of Money-losing Association Publication

Typical profile of an association that operates in the red is a real estate or construction industry magazine or newsletter published monthly or every other month by a staff of five people or less. The publication has been published for less than 20 years and has a circulation of under 10,000. Ads are sold by staff and contribute to an annual revenue of under $ 1 00,000. Expenses also are under $ 1 00,000.

*Format: 69% Magazine 23% Newsletter 8% Tabloid

Frequency: 5 1 % Monthly 29% 6x year 14% Quarterly 6% 9x year

Staff size: 77% Under 5 13% 5-10 9% 10+

Circulation: 55% Under 10K 36% 10-50K 5% 100K+ 4% 50-100K

Years published: 47% Under 20 33% 20-50 18% 50+

Ads sold by: 60% Staff only 19% Outside reps only 13% Both 8% No ads

Expenses: 47% Under $100K 19% $250-500K 15% $100-250K 13% $500K+

Revenues: 57% Under $100K 12% $250-500K 12% $100-250K 11% $500K+

Type of business: 22% Real estate 14% Healthcare 7% Finance 6% Agricultural 5% Legal 4% Education 3% Environmental 3% Insurance 2% Sports 23% Other

*Percentages don't always add to 100 since not aU respondents answered all questions