Shrinking margins at the SPA.

Like the rest of the software industry, the Software Publishers Association is beginning to feel the squeeze of shrinking margins. The SPA just took the wraps off its fiscal 1995 financial report, and the numbers tell a familiar story: Revenues are up slightly to a worldwide total $10,424,436, but the bottom line (which non-profit organizations euphemistically call "excess revenue over expenses") is a modest $158,081, equal to just 1.5% of revenues. By comparison, two years ago the SPA managed to bring 20% of its revenues to the bottom line; one year ago, its net was still a healthy 15%.

Despite the recent squeeze, however, the SPA's finances remain fundamentally sound. After more than ten years of operation, the association has piled up a hefty $6,454,515 in cash and liquid investments, equal to more than two years worth of membership dues. Some of this war chest represents anti-piracy settlements that can't be spent on general membership activities. But the rest of the SPA's balance sheet is otherwise almost debt-free, leaving almost $2 million in working capital ("fund balances" in non-profit accounting terms). So there's no immediate chance that we'll see SPA staffers on the streets of Washington, carrying signs that say "Will Lobby for Food."

In fact, like most organizations, the SPA is essentially a collection of profit centers, each of which makes a different contribution to the whole:

* Membership: Even after the defection of several of the SPA's largest members, U.S. membership fees remain the association's single largest source (27%) of revenue--$2,861,036, up 6% from 1994's level. According to SPA marketing manager Kay Heiberg, the SPA worldwide has about 900 software developers and publishers as members and 300 associate members; the average member pays $2,725 in annual dues and has annual sales in the $1-$2 million range.

* Anti-piracy: The SPA's highly-visible anti-piracy program continues to be the association's second-largest cash cow, producing 1995 revenues of $2,543,489 (24% of total income). But this "litigation settlement" income may be in jeopardy. Anti-piracy income dropped 24% compared to the 1994 total, and 1994 showed a 9% decline over 1993. Executive director Ken Wasch says the decline merely demonstrates that "we're winning the battle against piracy." But another factor may be competition from the rival Business Software Alliance, whose anti-piracy settlements have jumped 30% over last year. (As of August, the BSA had already taken in $4 million in 1995 settlements.) Moreover, even though revenues are shrinking, the SPA's spending on anti-piracy efforts actually rose 25% over 1994, to a near-breakeven level of $2,537,683.

* Conferences: The SPA's two annual conferences continue to be one of the association's most profitable efforts. In 1995, these two events brought in $1,990,357 (exclusive of income from the Codie awards), representing 19% of worldwide revenues. And the bottom line for these two events is particularly rosy: Conference costs in 1995 amounted to only $1,011,387, a profit margin of almost 50%.

* SPA Europe: The SPA's six-person office in Paris continues to run in the red. In 1994, SPA Europe produced $900,173 in revenue (primarily from membership and conference fees) and cost $1,173,863 to operate. This year, largely with the help of a $206,186 piracy settlement, revenues rose to $1,295,478. But at the same time SPA Europe's expenses rose to $1,605,809, producing a net loss of $310,331.

Tom Meldrum, CFO, Software Publishers Association, 1730 M St., NW, Washington, D.C. 20036; 202/452-1600.